NPA situation likely to worsen further: RBI

Mumbai: The Reserve Bank on Tuesday called for greater vigilance on the domestic macro-economic front saying conditions, which pushed GDP growth to 7.7 per cent in March 2018 quarter, are changing and warned that bad loan situation might worsen.

The economy appears to be gathering strength although global commodity price swings and turbulent capital flows are a constant reminder to our fast-growing economy that there can be little scope for complacence, if at all any, said RBI deputy governor Viral Acharya in a foreword to the Financial Stability Report.

While economic growth is firming up, conditions that buttressed fiscal consolidation, inflation moderation and a benign current account deficit over the last few years are changing, thereby warranting caution, the report said.

“In the domestic financial markets, structural shifts are altering the pattern of credit intermediation and impacting market interest rates.

“These developments call for greater vigilance on the domestic macroeconomic front to reinforce financial stability,” it said.

Referring to the banking sector, the report said the stress in the banking sector continues as gross non-performing advances (GNPA) ratio rises further.

Profitability of scheduled commercial banks (SCBs) declined, partly reflecting increased provisioning. While this has added pressure on SCBs' regulatory capital ratios, the provisioning coverage ratio has increased.

Credit growth of SCBs picked up during 2017-18, notwithstanding sluggish deposit growth, the report said.

“Macro-stress tests indicate that under the baseline scenario of current macroeconomic outlook, SCBs’ GNPA ratio may rise from 11.6 per cent in March 2018 to 12.2 per cent by March 2019,” the report said.