Banks' balance sheets stay robust as NPAs fall: RBI Report

The profitability of Indian banks improved for the sixth consecutive year in 2023-24 and their non-performing assets (NPAs) declined to a 13-year low of 2.7 per cent. According to a report released by the Reserve Bank of India, the financial position of Indian banks has stayed robust, marked by the sustained expansion in loans and deposits. India’s macro fundamentals have boosted the performance and soundness of the banking and non-banking financial sectors.
Asset quality improved, with the gross non-performing assets (GNPA) ratio falling to its lowest in 13 years at 2.7 per cent in end-March 2024 and 2.5 per cent in end-September 2024. RBI said the capital position of banks remained satisfactory, as reflected in key parameters like leverage ratio and capital to risk-weighted assets ratio (CRAR). The net bad loans of banks fell to 0.57 per cent of total loans at September-end, from 0.62 per cent in end-March, driven by stronger loan-loss buffers. The asset quality of non-bank finance companies (NBFCs) also improved further in 2023-24 amid a sustained double-digit balance sheet growth.Further, strong credit expansion by NBFCs was accompanied by further strengthening of their balance sheets, improvement in credit quality and profitability, and satisfactory capital buffers. The net profit of the scheduled commercial banks increased by 32.8 per cent to 3 lakh 49 thousand 603 crore rupees during the last fiscal.
The net NPA (NNPA) ratio fell to a decadal low of 0.62% at end-March 2024, driven by stronger provision buffers. As of September 2024, the NNPA ratio improved to 0.57%. The slippage ratio, which measures new accretions to NPAs as a share of standard advances at the beginning of the year, improved during 2023-24. For the third consecutive year, the slippage ratio of private banks remained higher than public banks on account of the former’s larger fresh accretion to NPAs.

(Business Correspondent)