Banks' NPAs could rise to 6.9% by March 2017

Banks' gross non-performing assets (GNPAs) could rise to 6.9 per cent by March 2017, the deadline given by Reserve Bank of India (RBI) Governor Raghuram Rajan for banks' balance sheet clean-up, the government said on Saturday.

"If the macroeconomic conditions deteriorate, the GNPA ratio may increase further, and it could rise to around 6.9 per cent by March 2017 under a severe stress scenario," the finance ministry said in its annual report 2015-16, citing the Reserve Bank of India's "Financial Stability Report (FSR)" of December 2015 for the expected rise in non-performing assets (NPAs).

"The macro stress test for credit risk suggests that under the baseline scenario, the GNPA ratio may rise to 5.4 per cent by September 2016 from 5.1 per cent in September 2015," it said quoting the RBI report, which said that under a severe stress scenario, the banks' Capital to Risk Asset Ratio (CRAR) or capital adequacy ratio could decline to 10.4 per cent by March 2017 from 12.7 per cent as of September 2015.

The ministry said that the main reasons for increase in NPAs have been due to sluggishness in the domestic growth during the recent past, slowdown in recovery in the global economy and continuing uncertainty in the global markets leading to lower exports of various products.

External factors including the ban in mining projects, volatility in prices of raw material and the shortage in availability of power have impacted the operations in the textiles, iron and steel, delay in various infrastructure projects and aggressive lending by banks in past, have also resulted in rising NPAs, it said.

"Infrastructure loan requirements are such that only the big public sector banks could assume the exposure under consortium arrangements," it said.

The RBI report however also presented the possibility of NPAs to subsequently improve to 5.2 per cent by March 2017, provided the macroeconomic scenario improved.


Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel