• The gross non-performing asset (GNPA) ratio of India’s Scheduled Commercial Banks (SCBs) may climb by the end of the current fiscal year to as much as 11.2% under a severe stress scenario, from 7.48% in March 2021, the Reserve Bank of India (RBI) said in the Financial Stability Report.
  • “The capital to risk-weighted assets ratio (CRAR) of SCBs increased to 16.03% and the provisioning coverage ratio (PCR) stood at 68.86% in March 2021,” the central bank said in its report.
  • Going forward, as banks respond to credit demand in a recovering economy, “they will need to reinforce their capital and liquidity positions to fortify themselves against potential balance sheet stress,” it added.
  • Among the sectors that have been badly hit by the lockdowns and curfews are retail trade, travel, hospitality, aviation and MSMEs. The government has come out with credit guarantee schemes for MSMEs as also for the healthcare sector which should help revive businesses and rein in defaults.
  • But the banks are well-capitalised and moreover, have high provision coverage ratios. The fall in the capital adequacy would be relatively small and, even if the going gets really bad, all 46 banks would have adequacy ratios well above the regulatory minimum of 9%.

A non performing asset (NPA) is a loan or advance for which the principal or interest payment remained overdue for a period of 90 days.