The Report says that the public sector banks should be able to attract private capital rather than be dependent on the government for money
Calling for governance reforms among public sector banks, the Financial Stability Report (FSR) said the non-performing assets (NPA) cycle has improved. The report said that the gross NPAs fell to 9.3% of the total bank credit at the end of March 2019 after having peaked in March 2018, when they had reached 11.3%. It said that the NPAs are likely to fall further to 9% by 2020.
The Report said that the public sector banks (PSBs) should be able to attract private capital rather than be dependent on the government for money.
"As far as PSBs (public sector banks) are concerned, the proof of the pudding lies in the PSBs' ability to attract private capital through market discipline rather than being overly dependent on the government for capital," the report said.
"With the bulk of the legacy non-performing assets (NPAs) already recognised in the banking books, the NPA cycle seems to have turned. The increased pace at which NPAs were recognised led to the NPA cycle peaking in March 2018." With most of the NPAs already recognised, the NPA cycle turned around with GNPA (gross NPA) ratio declining to 9.3% in March 2019," the report said.
The year-on-year growth in GNPAs also decelerated for both private sector and public sector banks. Large borrowers accounted for 53% of the total bank credit and 82.2% of the gross NPAs at the end of March 2019 marginally lower than the year-ago period when the credit offtake of large borrowers was 54.7% while they accounted for 83.9% of the gross NPAs.
The asset quality across broad sectors improved in March 2019 as compared to September 2018, except agriculture, which showed a marginal increase in GNPA ratio. Improvements in asset quality in the 'industry' sector were noticeable across all bank groups. In the large borrower accounts, the proportion of funded amount outstanding with any signs of stress came down from 25.3% in September 2018 to 20.9 % in March 2019.
The report said while the public sector banks (PSBs) registered a credit growth of 9.6 % in March 2019, private sector banks' (PVBs) credit growth remained strong at 21%. PSBs' deposit growth remained sluggish at 6.5% whereas that of private sector banks continued to be in double digits at 17.5%. Foreign banks credit and deposit growth also improved to 12% and 17.6%, respectively, in March 2019.
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