Foreseeing worsening situation of bad loans in the country, Reserve Bank today said the gross non-performing assets of the banks can rise to as high as 8.5% and in severe stress situation it can go up to 9.3%. Gross NPAs were 7.6% the total advances of banks in March 2016.
Banks’ gross NPA had stood at 5.1 per cent in September 2015, a report released by RBI said.
“Gross NPAs of banks’ sharply increased to 7.6 per cent of gross advances from 5.1 per cent between September 2015 and March 2016 after asset quality review,” according to the Financial Stability Report (FSR) released by RBI.
Net non-performing advances as a percentage of the total net advances increased to 4.6 per cent in March 2016 from 2.8 per cent in September 2015.
The report said macro stress tests suggest that under the baseline scenario, the GNPA ratio of banks may rise to 8.5 per cent by March 2017 from 7.6 per cent in March this year.
“If the macro scenarios deteriorate in the future, the GNPA ratio may further increase to 9.3 per cent by March 2017 under at severe stress scenario,” the report said.
RBI conducted asset quality review (AQR) during the second half of 2015-16 and it covered 36 banks (including all PSBs), which accounted for 93 per cent of the banks’ gross advances.
The sample reviewed in AQR constituted over 80 per cent of the total credit outstanding and 5 per cent of the number of accounts of the banking system reported through CRILC.
The main objective of AQR was to examine the assessment of asset quality at the bank level and at the system level as a whole and to uniformly deal with cases of divergence in identifying NPAs and additional provisioning across banks.
RBI said among the banks, PSBs may continue to register highest GNPA ratio.
Under the baseline scenario, PSBs GNPA ratio may go up to 10.1 per cent by March from 9.6 per cent as of March 2016.
However, under a severe stress scenario, it may increase to 11 per cent by March 2017.
The report said the GNPA ratio of private sector banks, under the baseline scenario, may rise to 3.1 per cent by March 2017 from 2.7 per cent as of March 2016, which could further increase to 4.2 per cent under a severe stress scenario.
The report further said there was a sharp reduction in restructured standard standard advances ratio to 3.9 per cent in March from 6.2 per cent in September.