Reserve Bank of India said on Wednesday that banks will witness further deterioration in their non-performing assets (NPAs) or bad loans due to the “economic situation prevailing” in the current fiscal.
As per RBI’s Annual Report 2017-18, gross non-performing assets (GNPAs) plus restructured standard advances in the banking system remained elevated at 12.1 per cent of gross advances at end-March 2018.The combined impact of the increase in provisioning against NPAs and mark-to-market (MTM) treasury losses on account of the hardening of yields eroded the profitability of banks, resulting in net losses, it said. In a pre-emptive response, it said, the RBI allowed banks to spread their MTM losses over four quarters starting from third quarter. “Going forward, the stress tests carried out by the Reserve Bank suggest that under the baseline assumption of the current economic situation prevailing, the GNPA ratio of scheduled commercial banks (SCBs) may increase further in 2018-19,” it said.