The Reserve Bank of India (RBI) reported that the gross non-performing assets (GNPAs) ratio for Indian banks has reached a ten-year low of 3.9 percent as of March 2023. The net non-performing assets (NNPA) ratio also declined to 1.0 percent, according to the RBI’s bi-annual Financial Stability Report (FSR). The report further stated that the GNPAs are expected to improve to 3.6 percent in the baseline scenario.
The report also revealed that stress tests indicate that Scheduled Commercial Banks (SCBs) would be able to meet the minimum capital requirements even under severe stress scenarios. It emphasized that SCBs are well-capitalized and capable of absorbing macroeconomic shocks over a one-year horizon, even without additional capital infusion. The report projected that the GNPA ratio for all SCBs may improve to 3.6 percent by March 2024.
In terms of capital adequacy, the report projected the system-level capital to risk-weighted assets ratio (CRAR) in March 2024 to be 16.1 percent under the baseline scenario, 14.7 percent under the medium stress scenario, and 13.3 percent under the severe stress scenario.
RBI Governor Shaktikanta Das, in the foreword of the report, highlighted the strengthened balance sheets of the banking and corporate sectors, leading to a “twin balance sheet advantage” for growth. He expressed that the Indian financial sector is stable and resilient. Additionally, he emphasized the importance of international cooperation and regulatory focus in addressing challenges such as cyber risks and climate change.
Governor Das stressed the non-negotiable nature of financial stability, urging all stakeholders in the financial system to work together to preserve it. He also underscored the need for vigilance, acknowledging global instances of banks facing severe stress or collapse, while expressing confidence in the commitment of India’s financial sector regulators and entities towards maintaining stability.