Indian Banks' Non-Performing Assets Hit Multi-Year Low, Reflects Economic Resilience: RBI Report

The Reserve Bank of India (RBI) announced on Thursday (28 December) that the net non-performing assets ratio of banks has reached a multi-year low of 0.8 per cent as of September 2023, indicating the robustness of the country's domestic financial system as reported by The Indian Express.

According to the Financial Stability Report (FSR) by the RBI, the non-banking financial companies sector's resilience has also seen improvement, with a Capital to Risk-Weighted Assets Ratio (CRAR) at 27.6 per cent, a Gross Non-Performing Assets (GNPA) ratio at 4.6 per cent, and a Return on Assets at 2.9 per cent, all reported for September 2023.

Furthermore, the GNPA ratio for banks has similarly decreased to a multi-year low of 3.2 per cent, as highlighted in the report.

The FSR, representing the collective evaluation of the Financial Stability and Development Council's sub-committee, assesses the risks to financial stability and the resilience of the Indian financial system.

The report also conducted macro stress tests for credit risk, projecting that SCBs would meet minimum capital requirements, with the system-level CRAR in September 2024 estimated at 14.8 per cent, 13.5 per cent, and 12.2 per cent under baseline, medium, and severe stress scenarios.

While the domestic financial system is described as resilient, supported by strong macroeconomic fundamentals, sound financial institution balance sheets, moderating inflation, an improving external sector position, and ongoing fiscal consolidation, the global economy is facing multiple challenges.

These challenges include the potential for slowing growth, high public debt, growing economic fragmentation, and prolonged geopolitical conflicts.