Despite foreseeing a possible spike in gross non-performing assets to 4.4 per cent of the total advances by March 2014 from 3.42 per cent a year ago, the Reserve Bank today ruled out any systemic risk to the system, saying banks will still be having higher capital adequacy.
“Our stress tests suggest that under a severe stress scenario, the gross NPA ratio of banks may rise to 4.4 per cent by March 2014 but even under such a scenario the system level capital adequacy ratio of banks will be 12.2 per cent only, which is well above the required 9 per cent,” RBI said in its annual report.
“The system wide gross NPAs rose to 3.42 per cent in FY13 from 2.94 per cent in FY12. This is likely to touch 4.4 per cent in FY14,” RBI said.
The asset quality of banks has deteriorated on account of slowdown in the economy and emergence of sector—specific issues amid structural bottlenecks in economy.
The ratio of gross NPA to gross advances for commercial banks rose from 2.36 per cent in March 2011 to 3.92 per cent in June 2013.
While public sector banks accounted for the disproportionate share in this increase in NPAs, the new private sector banks managed to lower their NPA ratio, the report highlighted.
Out of the total NPAs of 3.42 per cent, public sector banks’ NPAs stood at 3.84 per cent in FY13, up from 3.17 per cent in FY12, while that of private banks came down to 1.91 per cent from 2.18 per cent and that of foreign banks rose to 2.97 per cent from 2.68 per cent.