Asset quality of commercial banks can be worsen in 2020: RBI

Mainly due to the economic slowdown, asset quality of commercial banks can be worsen in 2020 as well as due to increase in slippages and declining credit growth, warned the RBI. The gross non-performing assets (GNPA) ratio may increase to 9.9% by September 2020 from 9.3%.
“The RBI’s macro-stress tests for credit risk show that under the baseline scenario, schedule commercial banks GNPA ratio may increase from 9.3% in September 2019 to 9.9% by September 2020 primarily due to change in macroeconomic scenario, marginal increase in slippages and the denominator effect of declining credit growth,” said the RBI in the 20th issue of the Financial Stabillity Report.
Among the bank groups, state-owned banks GNPA ratios may increase to 13.2% by September 2020 from 12.7% in September 2019 whereas for private banks it may increase to 4.2% from 3.9%; and for foreign banks, to 3.1% from 2.9%.
“Continuing the trend witnessed in the previous half-year, the banking sector has shown signs of stabilisation. That said the performance of public sector banks (PSBs) needs to improve and they need efforts to build buffers against disproportionate operational risk losses. Private sector banking space also needs to focus on aspects of corporate governance,” wrote Shaktikanta Das, governor of RBI, in the foreword to the report.