Profitability of banks is likely to come under pressure in the coming quarters in view of deteriorating asset quality of banks mainly on account of economic slowdown,
RBI said in a report.
"With the growth rate in GNPAs (gross
non-performing assets ) continuing to tread well above the credit growth and movements in slippages remaining upward, the profitability of banks may come under pressure in the coming quarters," RBI said in its latest Financial Stability Report (FSR).
The asset quality of banks has seen considerable deterioration during the half year ended September 2012, it said, adding, GNPA ratio for all banks rose sharply to 3.6 per cent as at end September 2012 from 2.9 per cent as at end March 2012.
Net NPA ratio stood at 1.7 per cent as at end September 2012, as against 1.2 per cent as at end March 2012, it said.
The report also said the recent deterioration in asset quality as well as proposed changes in provisioning norms could pose challenges for banks for migrating to the new global capital risk norms Basel III.
Final guidelines for Basel III implementation have already been issued and it will come into force in a phased manner beginning January 1, 2013.
Among the bank groups, the report said, the public sector banks witnessed a high degree of deterioration in asset quality.
The growth rate of GNPAs at 45.7 per cent as at end September 2012 outpaced that of gross advances during same period, highlighting the rising concerns on asset quality, it said.
"The concerns on asset quality are also underscored by the increasing trend in the slippage ratio as well as ratio of slippages to actual recoveries (excluding upgradations)," it said.
However, slippage to recovery ratio for all the bank groups improved marginally during the quarter ended September 2012.
As regards restructuring under CDR mechanism, this has also been in line with increase in non-CDR restructuring.
According to data furnished by CDR Cell, the report said there has been a spurt in the number of cases referred to CDR Cell from the year 2011-12 onwards.
As against 49 cases involving Rs 22,620 crore referred during 2010-11, 87 cases involving Rs 67,890 crore were referred during 2011-12.
During the period April-August of the current year, there are 59 cases involving Rs 30,640 crore being referred to CDR, it said.
The reasons for rise in restructuring may be attributed to the effects of global recession coupled with internal factors like domestic slow down, which have played a significant role in the deterioration in asset quality, it said. .
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