Indian The Reserve Bank (RBI) has said in a report that the Indian economy and financial system remain strong and resilient as the gross non-performing assets (GNPA) ratio has come down to a multi-year low of 2.8 percent at the end of March 2024. Releasing the June Financial Stability Report (FSR) on Thursday, the RBI said that the GNPA ratio of scheduled commercial banks came down to a multi-year low of 2.8 percent. While the net non-performing asset (NNPA) ratio stood at 0.6 percent at the end of March 2024.
Indian economy remains strong
According to the report, “The Indian economy and financial system remain strong and resilient, supported by macroeconomic and financial stability. Banks and financial institutions with improved balance sheets are supporting economic activity through continued credit expansion.” The report says that the capital to risk-weighted assets ratio (CRAR) and common equity tier 1 (CET 1) ratio of scheduled commercial banks (SCBs) stood at 16.8 per cent and 13.9 per cent respectively at the end of March.
Commercial banks will be able to comply with minimum capital requirements
According to the FSR report, comprehensive stress tests for credit risk indicate that commercial banks will be able to comply with minimum capital requirements. Systemic CRAR at the end of the financial year is estimated to be 16.01 per cent, 14.4 per cent and 13.0 per cent under baseline, moderate and severe stress scenarios, respectively. The report says that these scenarios are strictly conservative estimates made under hypothetical shocks and the results should not be interpreted as forecasts.
NBFC’s health is good
The Reserve Bank report says that the health of non-banking financial companies (NBFCs) remained healthy at the end of March 2024. Their CRAR was 26.6 percent, GNPA ratio 4.0 percent and return on assets (ROA) 3.3 percent. In terms of the global economy, the report says that it is facing increased risks from long-running geopolitical tensions, increased public debt and slow pace of decline in inflation. However, the FSR report says that despite these challenges, the global financial system remains combative and financial conditions are stable.
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