In Depth: NPAs Decline

In some good news for the Indian financial sector, non-performing assets reported by banks are showing a decline after rising constantly for seven years...
An RBI report on the trend and progress of the banking sector shows that gross non-performing loans of banks improved to 9.1 per cent by the close of September 2019, compared to 11.2 per cent in financial year 2018.
Net non-performing assets (NPAs) of all commercial banks reduced to 3.7 per cent in FY19 as against 6 per cent in FY18.
Further reflecting the improvement in the health of the banking system, net NPAs nearly halved to 3.7 per cent in FY19 from 6 per cent in FY18.
While cases referred for recovery through legal mechanism shot up, cleaning up of balance sheets through sale of bad loans to asset reconstruction companies decelerated annually and declined as a proportion of GNPAs in the beginning of FY19.
As per the report this was largely due to the conducive policy environment and the Insolvency and Bankruptcy Code.
In this edition of IN DEPTH, we analyse the RBI annual report on trends and progress of banking in 2018-19, the factors that led to the decline in NPAs and challenges that remain.

Anchor: Teena Jha

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