Indian economy resilient, banks’ bad debts at multi-year low: RBI

Mumbai, December 28

The Reserve Bank of India (RBI) on Thursday released the 28th issue of the Financial Stability Report, December 2023 reflecting the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC) on risks to financial stability and the resilience of the Indian financial system.

According to the RBI report, scheduled commercial banks’ gross non-performing assets (GNPA) ratio continued to decline to a multi-year low of 3.2% and the net non-performing assets (NNPA) ratio to 0.8% in September 2023.

Financial Stability Report

• As per the RBI’s Financial Stability Report, banks’ gross non-performing assets ratio continued to decline to a multi-year low of 3.2% and the net non-performing assets ratio to 0.8% in September
• The global economy is facing multiple challenges: prospects of slowing growth; large public debt; increasing economic fragmentation; and prolonging geopolitical conflicts
• The resilience of the NBFCs improved with capital to risk-weighted assets ratio at 27.6%, gross NPA ratio at 4.6% and return on assets at 2.9%, respectively, in September

The RBI further said the Indian economy and the domestic financial system have remained resilient which is supported by strong macroeconomic fundamentals and healthy balance sheets of financial institutions, moderating inflation, improving external sector position and continuing fiscal consolidation. However, the RBI said the global economy is facing multiple challenges: prospects of slowing growth; large public debt; increasing economic fragmentation; and prolonging geopolitical conflicts.

As per the report, the capital to risk-weighted assets ratio (CRAR) and the common equity tier 1 (CET1) ratio of scheduled commercial banks (SCBs) stood at 16.8% and 13.7%, respectively, in September 2023.

“Macro stress tests for credit risk reveal that SCBs would be able to comply with minimum capital requirements, with the system-level CRAR in September 2024 projected at 14.8%, 13.5% and 12.2%, respectively, under baseline, medium and severe stress scenarios,” the RBI report said.

Also, the RBI said the resilience of the non-banking financial companies (NBFCs) sector improved with CRAR at 27.6%, GNPA ratio at 4.6% and return on assets (RoA) at 2.9%, respectively, in September 2023.

The Financial Stability Reports, published by the Reserve Bank of India are periodic exercises for reviewing the nature, magnitude and implications of risks that may have a bearing on the macroeconomic environment, financial institutions, markets and infrastructure. These reports also assess the resilience of the financial sector through stress tests.