RBI Financial Stability Report: The Reserve Bank of India (RBI) has announced that the gross non-performing assets (NPA) ratio of Indian scheduled commercial banks (SCBs) has fallen to a multi-year low of 2.8% as of the end of March 2024. The net NPA ratio has also declined, reaching 0.6%. This data was revealed in the RBI’s 29th Financial Stability Report released on Thursday.
Financial Health Indicators
The report highlights that SCBs have experienced rising profitability alongside the decrease in non-performing assets. The return on assets (ROA) and return on equity (RoE) for these banks are near decade highs, standing at 1.3% and 13.8%, respectively.
Furthermore, the capital to risk-weighted assets ratio (CRAR) and the common equity tier 1 (CET1) ratio of SCBs were reported at 16.8% and 13.9%, respectively, as of the end of March 2024. These figures indicate strong capital adequacy for the banks.
Stress Test Projections
The RBI’s report includes projections from macro stress tests for credit risk, which suggest that SCBs will be able to meet minimum capital requirements under various scenarios. By March 2025, the system-level CRAR is projected to be 16.1% under a baseline scenario, 14.4% under a medium stress scenario, and 13.0% under a severe stress scenario.
Non-Banking Financial Companies (NBFCs) Performance
The report also sheds light on the performance of non-banking financial companies (NBFCs). As of the end of March 2024, NBFCs’ CRAR was 26.6%, their gross NPA ratio stood at 4.0%, and their return on assets was 3.3%. These figures reflect the robust health and resilience of the NBFC sector.
The RBI’s findings underscore the strengthening financial stability of both banks and NBFCs in India, supported by improving asset quality and solid capital buffers.
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