*Passing stress test | The Indian Express

Clipped from: https://indianexpress.com/article/opinion/editorials/indian-banking-rbi-report-loans-capital-assets-8004073/

New RBI report says asset quality, capital position of banking system continues to improve. That’s something to build on

Data presented in the report shows that banks have seen an improvement in their asset quality across all major sectors.

Despite concerns, the asset quality of the Indian banking system has continued to improve. According to the Reserve Bank of India’s latest financial stability report, gross non-performing loans (GNPAs) of the banking system have declined from 7.4 per cent in March 2021 to a six-year low of 5.9 per cent in March 2022. While public sector banks continue to be more stressed than private banks — for the former, bad loans stood at 7.6 per cent of advances, while for the latter, the figure is lower at 3.7 per cent — the improvement is broadbased. Alongside, banks have also witnessed an improvement in their capital position, with the capital to risk weighted assets ratio rising to 16.7 per cent at the end of March 2022. This is good news. It is also comforting that the central bank’s stress tests indicate that banks are well capitalised and are “capable of absorbing macroeconomic shocks even in the absence of any further capital infusion by stakeholders.”