RBI foresees gross NPAs rising to 9.9% by September 2020
This is primarily due to change in macroeconomic scenario, marginal increase in slippages and the denominator effect of declining credit growth, RBI said in its Financial Stability Report
- Dec 28, 2019,
- Updated Dec 28, 2019 12:25 AM IST
The Reserve Bank of India's (RBI) macro stress tests shows the gross non-performing assets (NPAs) of commercial banks to jump from 9.3 per cent in September 2019 to 9.9 per cent in the next one year.
This finding is based on a baseline scenario which assumes the continuation of the current economic situation in the future. The GDP is down to 4.5 per cent in the second quarter of financial year 2019-20, and is expected to hover around 5 per cent for the entire fiscal.
"This is primarily due to change in macroeconomic scenario, marginal increase in slippages and the denominator effect of declining credit growth," says RBI in its Financial Stability Report.
So which category of banks would be most impacted? No prizes for guessing! The public sector banks, that control two-third of the banking sector in terms of deposits and advances, would see their NPAs increase to 13.2 per cent by September 2020, from 12.7 per cent in September 2019. The private banks, however, may see their NPAs increase to 4.2 per cent from 3.9 per cent in the same period. The foreign banks, which control less than 5 per cent of the total banking assets, will see NPAs rise to 3.1 per cent from 2.9 per cent during this one year period.
Bank credit growth likely to fall to 58-year low in FY20
According to the RBI report, the credit growth of PSBs has declined to 4.8 per cent year-on-year in September 2019, from 9.6 per cent in March 2019. The credit growth of private sector banks has moderated to 16.5 per cent from 21 per cent. Most of the private banks are retail-focused and have profited in the recent past at the cost of the PSBs. Meanwhile, many private banks have either raised new capital or are in the process of raising capital. The new leadership at the private bank is also stabilizing with a brand new strategy to prepare for the future growth.
The Reserve Bank of India's (RBI) macro stress tests shows the gross non-performing assets (NPAs) of commercial banks to jump from 9.3 per cent in September 2019 to 9.9 per cent in the next one year.
This finding is based on a baseline scenario which assumes the continuation of the current economic situation in the future. The GDP is down to 4.5 per cent in the second quarter of financial year 2019-20, and is expected to hover around 5 per cent for the entire fiscal.
"This is primarily due to change in macroeconomic scenario, marginal increase in slippages and the denominator effect of declining credit growth," says RBI in its Financial Stability Report.
So which category of banks would be most impacted? No prizes for guessing! The public sector banks, that control two-third of the banking sector in terms of deposits and advances, would see their NPAs increase to 13.2 per cent by September 2020, from 12.7 per cent in September 2019. The private banks, however, may see their NPAs increase to 4.2 per cent from 3.9 per cent in the same period. The foreign banks, which control less than 5 per cent of the total banking assets, will see NPAs rise to 3.1 per cent from 2.9 per cent during this one year period.
Bank credit growth likely to fall to 58-year low in FY20
According to the RBI report, the credit growth of PSBs has declined to 4.8 per cent year-on-year in September 2019, from 9.6 per cent in March 2019. The credit growth of private sector banks has moderated to 16.5 per cent from 21 per cent. Most of the private banks are retail-focused and have profited in the recent past at the cost of the PSBs. Meanwhile, many private banks have either raised new capital or are in the process of raising capital. The new leadership at the private bank is also stabilizing with a brand new strategy to prepare for the future growth.