Winning Bizness Desk
Mumbai. The financial condition of the banking sector in the country is continuously getting better than ever before. A new RBI report has revealed that the NPA level of Indian banks has come down to a 10-year low. The Reserve Bank of India has released the new Financial Stability Report (FSR) on Wednesday. According to this, in March 2023, the net NPA (non-performing asset or stranded loan) of India's scheduled commercial banks has come down to a 10-year low. This has remained equal to 3.9 percent of the total loan disbursed by the banks. Banks in India declare a loan as NPA when its installment is not paid for 90 days. According to the rules of RBI, banks have to record the entry of NPA separately in their balance sheet, while a provision of a fixed amount has to be made to compensate for this loss. At present, an exercise is going on in the country to make a bad bank i.e. a bank which recovers the bad loans from common banks by purchasing them at its own level.
Rajan started to minimise NPA
Notably, when economist Raghuram Rajan was the governor of the Reserve Bank of India (RBI), he started working on bringing down the NPAs ie the bad loans of the banks to improve the condition of the country's banking sector. After him Urjit Patel took over this responsibility and now Shaktikanta Das is the governor of RBI. Everyone has continued the work of bringing down the NPA level and its effect is visible.
Indian banks have shown it's strength
The RBI report also presents many more figures regarding NPAs. Accordingly, macro stress tests were conducted regarding the risk of lending by commercial banks. It came to light that all the banks have sufficient amounts of capital and all follow the rule of minimum capital requirement. The capital position with them is so good that even in adverse circumstances they will be able to meet the minimum requirement of capital. The ratio of Gross NPA and Net NPA of the country's banks has come down significantly in March 2023 as compared to March 2018. In March 2018, it was 11.5 percent and 6.1 percent respectively, which has now come down to 3.9 percent and 1.0 percent.
Economic conditions looks good
The economic conditions of the world have changed since the last time RBI released the FSR. Shaktikanta Das says that the growth situation of the Indian economy and financial system has also changed. The economic condition of America and Europe shook the global financial system at the global level in March this year. In comparison, India's banking and financial sector is quite stable, on the contrary, the loan disbursement of banks has increased here.
