Banks’ gross NPA ratio declines to 13-year low of 2.5% at September end: RBI report

The gross non-performing assets (GNPAs) ratio of scheduled commercial banks (SCBs) declined to the lowest in more than 13 years at 2.5 % at the end of September 2024, a Reserve Bank of India (RBI) report said on Dec 26.

In fiscal year 2024 (FY24), the consolidated balance sheet of commercial banks in the country remained robust, marked by sustained expansion in both credit and deposits, the report said.

“Asset quality improved, with the gross non-performing assets (GNPA) ratio falling to its lowest in 13 years at 2.7 % at end-March 2024 and 2.5 % at end-September 2024,” the RBI’s report on Trend and Progress of Banking in India 2023-24 said.

The gross NPA of banks stood at 2.35 % in the financial year ended March 2010-11.

GNPAs of banks reduced by 15.9 % year-on-year (y-o-y) to Rs 4.8 lakh crore as on March 31, 2024. The improvement in the asset quality of lenders was on account of better recoveries and upgrades.

The report further said that the latest data indicates that the gross NPA ratio improved further to 2.5 % at September 2024.

Agri gross NPA ratio

The GNPA ratio remained the highest for the agricultural sector at 6.2 % and the lowest for retail loans at 1.2 % at the end of September 2024.

The GNPA ratio of education loans fell from 5.8 % in March 2023 to 3.6 % at end-March 2024 and 2.7 % at end-September 2024 but it remained the highest across retail loan segments, followed by credit card receivables and consumer durables.

The asset quality of the industrial sector has been improving since March 2018, with the GNPA ratio declining to 2.9 % in September 2024. The GNPA ratio of sectoral credit across bank groups has converged over the years.

Banks’ net NPA (NNPA) ratio also declined to a decadal low of 0.62 % at the end of March 2024, driven by stronger provision buffers. At the end of September 2024, the NNPA ratio improved further to 0.57 %, the RBI report said.

Slippage ratio

The slippage ratio, which measures new accretions to NPAs as a share of standard advances at the beginning of the year, also witnessed an improvement during 2023-24. For the third consecutive year, the slippage ratio of private sector banks (PVBs) remained higher than public sector banks (PSBs) on account of the former’s larger fresh accretion to NPAs.

Reflecting these gains in asset quality, the proportion of standard assets in total advances rose for all bank groups at the end of March 2024 from a year ago. The decline in the share of non-standard advances (comprising sub-standard, doubtful and loss advances) was led by moderation in doubtful assets.

At the end of March 2024, the share of large borrowal accounts (with total exposure of Rs 5 crore and above) in total advances of SCBs declined to 43.9 % at the end of March 2024 from 46.5 % at the end of the previous year.

The special mention accounts-1 (SMA-1) ratio declined for both PVBs and PSBs, overall as well as for large borrowal accounts. Loans in the SMA-1 category indicate accounts with interest or principal payments overdue between 31-60 days.