ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Lazy Banking Will Not Help

The non-performing asset ratio has been culled by tightening credit flows to productive sectors.

The 27th Financial Stability Report (FSR) for June 2023 presents a rosy picture of the banking sector. It points out that the gross non-performing assets (NPAs) ratio of banks, which reflects their overall level of inefficiency or efficiency, has come down from a high of 11.5% in March 2018 to 3.9% in March 2023. Similarly, the provisioning coverage ratio, which indicates the extent of losses arising out of NPA, improved from 40.1% in June 2016 to 74% by March 2023. This has also added to the stability of the sector.

However, this overall decline in gross NPAs was not uniform. They remain disproportionately high in the public sector banks, with their levels being more than double than that of the private sector. Between September 2021 and March 2023, the public sector banks reduced their gross NPAs from around 9% to 5.2%. However, in the same period, the private sector bank’s gross NPAs have halved from 4% plus to 2.2%, while that of foreign banks have reduced from around 3% to 1.9%. Clearly, the public sector banks are yet to catch up and achieve the industry norms.

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Updated On : 15th Jul, 2023
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