New Batch Registration: 25-July & 5-Aug 2025
+91 8988885151
It has come to our attention that certain coaching centers are misusing names similar to ours, such as Vajirao or Bajirao, in an attempt to mislead and attract students/parents. Please be informed that we have no association with these fake institutes and legal proceedings have already been initiated against them before the Hon'ble Delhi High Court. We urge students and parents to stay vigilant and let us know in case they are approached by such fake institutes.

Asset quality of Indian banks improves to decadal high: RBI from Vajirao & Reddy Institute

By : Author Desk Updated : 2023-12-28 17:02:14

Asset quality of Indian banks improves to decadal high: RBI

Context- According to the Reserve Bank of India’s (RBI) report ‘Trend and Progress of Banking in India’, the ratio of Gross Non-Performing Assets (GNPA) of Indian scheduled commercial banks (SCBs) has shown improvement in the second quarter of this fiscal year, reaching a new low in a decade. The report, released on Wednesday, stated that the asset quality, as indicated by the GNPA ratios, has been improving since 2018-19 and continued to do so in 2022-23. The GNPA ratio of SCBs decreased to a ten-year low of 3.9% at the end of March 2023 and further dropped to 3.2% at the end of September 2023.
  • During 2022-23, recoveries and upgradations contributed to about 45% of the reduction in GNPAs of SCBs. The report also highlighted that the consolidated balance sheet of SCBs (excluding Regional Rural Banks) grew by 12.2% in 2022-23, marking the highest growth in nine years.
  • The primary factor driving this growth on the asset side was bank credit, which expanded at its fastest rate in over a decade.
  • In 2022-23, the combined balance sheets of commercial banks saw double-digit growth, fueled by consistent credit growth. The profitability of banks improved due to higher lending rates and lower provisioning requirements, thereby strengthening their capital positions.
  • The report added that the capital to risk-weighted assets ratio (CRAR) of SCBs was 16.8% at the end of September 2023, with all bank groups meeting the regulatory minimum requirement and the common equity tier 1 (CET1) ratio requirement.
  • The Reserve Bank of India (RBI) reported that the combined balance sheet of urban co-operative banks (UCBs) grew by 2.3% in 2022-23, primarily due to loans and advances. The capital buffers and profitability of these banks also saw an improvement throughout 2022-23 and the first quarter of 2023-24.
  • The report also noted that the consolidated balance sheet of non-banking financial companies (NBFCs) saw a 14.8% expansion in 2022-23, driven by a double-digit credit growth. The sector’s profitability and asset quality improved in 2022-23 and the first half of 2023-24, while maintaining a Capital to Risk (Weighted) Asset Ratio (CRAR) above the regulatory requirement.
  • Looking forward to 2024, the RBI advised banks to be cautious of credit losses, despite the presence of higher capital buffers and a provision coverage ratio (PCR) as safety nets.
  • The RBI emphasized the importance of qualitative metrics such as enhanced disclosures, a strong code of conduct, and clear governance structures for financial stability.
  • Despite the global environment’s high uncertainty, the RBI expressed confidence in the Indian banking system’s potential for further improvement, citing better asset quality, high capital adequacy, and robust profitability. It added that financial stability is being supported by stronger corporate financials and balance sheet deleveraging.
  • The RBI highlighted that the growth rate of the unsecured retail segment has recently surpassed total bank credit growth. However, the asset quality of unsecured retail loans has remained stable.
  • The RBI also mentioned the calibrated and targeted macroprudential measures announced in November 2023 for select categories of consumer credit loans and bank lending to NBFCs, stating that these measures are pre-emptive and aimed at maintaining financial stability.
  • Looking forward, the RBI emphasized the need for NBFCs to diversify their funding sources and lessen their reliance on bank funding, considering the growing interconnectedness between banks and NBFCs. The central bank also stressed the importance of empathy in customer services for both banks and non-banks.
  • The RBI urged all stakeholders to safeguard the banking and payments system from potential fraud and data breaches arising from cyber threats. It further stated that banks and NBFCs should bolster their balance sheets through strong governance and risk management practices to cater to the evolving needs of the Indian economy.
  • Dinesh Khara, Chairman of the State Bank of India (SBI), spoke at the tenth edition of the SBI Banking & Economic Conclave 2023 in Mumbai. He highlighted the remarkable resilience shown by the banking sector over the past year as the economy continued to strengthen.
  • He noted that banks performed exceptionally well in FY23 and the first half of FY24, enhancing capital and other key ratios.
  • He pointed out that banks are preparing to finance multiple large-scale projects and the ambitious transition to clean/green energy and mobility. They are also developing extensive digital capabilities and forward-looking risk metrics to efficiently serve a young population with a high consumption rate.
  • He added that the ‘twin balance sheet advantage’ appears to be the new normal for supporting comprehensive economic growth.
  • Despite ongoing uncertainties in the global economic and geopolitical landscape, Khara stated that India has demonstrated resilience and is prepared to recover lost ground.
  • He mentioned that the Indian economy has continued to show strong resilience in the current year, building on the momentum gained in 2022-23.
  • This is despite global turmoil and escalating geopolitical tensions that threaten to alter trade terms. He noted that India achieved a growth rate of 7.7% in the first half of FY23-24, the highest among major economies worldwide.
  • Amidst the collapse of major banking institutions worldwide this year, he added, “The relative tranquility here indicates an unmatched maturity of the ecosystem, which seems to be a precursor of prosperous times ahead.”
Conclusion-  The Indian banking sector, including scheduled commercial banks (SCBs), urban co-operative banks (UCBs), and non-banking financial companies (NBFCs), has shown remarkable resilience and growth in the fiscal year 2022-23. Despite global uncertainties, these institutions have demonstrated robust performance, improved asset quality, and strong capital adequacy. The sector’s growth has been driven by diversified funding sources, empathetic customer services, and strong governance and risk management practices. Looking ahead, the sector is well-positioned to support the evolving needs of the Indian economy and contribute to its holistic growth. However, it must continue to safeguard against potential risks, including credit losses and cyber threats, to maintain financial stability.