Mumbai: Gross non-performing assets (GNPAs) of banking system is likely to drop to 4 percent by March 2016 with expected improvement in macroeconomic indicators going forward, the Reserve Bank said on Monday.
"The macro stress tests for credit risk suggest that under the baseline scenario, which assumes improvement in the overall macroeconomic scenario during the next financial year, the GNPA ratio of all SCBs may decline to 4 percent by March 2016 from 4.5 percent as at end September 2014," the Reserve Bank said in its Financial Stability Report (FSR) here.
The report, however, warned that if macroeconomic conditions deteriorate, the GNPA ratio of scheduled commercial banks (SCBs) may increase further and under a severe stress scenario it could rise to around 6.3 percent by March 2016.
"Under such a severe stress scenario, the system level CRAR (capital to risk weighted asset ratio) of banks could decline to 9.8 percent by March 2016 from 12.8 percent in September 2014."
The net non-performing advances (NNPAs), as a percentage of total net advances, increased to 2.5 percent in September 2014 from 2.2 percent in March 2014.
Stressed advances, including GNPAs and restructured standard advances, increased to 10.7 percent of the total advances from 10 percent between March and September 2014.
PSBs (public sector banks) continued to record the highest level of stressed advances at 12.9 percent of their total advances in September 2014, followed by their private peers at 4.4 percent.
The asset quality of PSBs is expected to improve, but they will continue to carry the highest GNPA ratio among the bank groups, the report said.
"Under a severe stress scenario, PSBs may record the lowest CRAR of around 9.2 percent by March 2016 as against 11.3 percent in September 2014, close to the minimum regulatory capital requirement of 9 percent."
The stress test revealed that among the seven select sectors, engineering is expected to register the highest GNPA ratio at 12 percent by March 2016, followed by the cement segment at 10.6 percent, it added.
