The trend of declining asset quality was also observed in commercial banks; at the end of March 2024, the gross non-performing asset (GNPA) ratio dropped from 3.2% in September of last year to 2.8%, a 12-year low. In addition, during the same period, the Reserve Bank of India’s (RBI) biannual Financial Stability Report revealed that the net non-performing assets (NPA) ratio decreased to 0.6% from 0.9%.
According to the report, all scheduled commercial banks’ GNPA ratios could increase to 2.5 percent by March 2025 under the stress test baseline scenario. According to macro stress tests for credit risk, all banks could maintain the regulatory minimum capital requirements even in extremely dire circumstances.
Amidst robust business expansion, the Indian banking sector saw consistent improvements in capital positions, asset quality, and profitability, according to the report. It was mentioned that public sector banks (PSBs) saw a significant drop in their GNPA ratio (76 bps) in the second half of FY24 compared to other bank groups.
According to the report, the provision coverage ratio improved to 76.4% in March 2024 due to active and deep provisioning by foreign banks and PSBs despite a decrease in the GNPA stock across all bank groups.
The impairment ratio in agriculture remained the highest despite a sustained improvement during the second half of 2023–2024, even as banks’ asset quality improved across the board.
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