The Reserve Bank of India on Wednesday said banks will witness further deterioration in their non-performing assets (NPAs) due to the “economic situation prevailing” in the current financial year.
“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 may increase further in 2018-19,” the RBI said in its Annual Report.
The central bank said the 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, the RBI allowed banks to spread their MTM losses over four quarters starting from third quarter, it said. The aggregate gross NPAs of SCBs increased primarily as a result of this transparent recognition of stressed assets as NPAs, from Rs 323,464 crore, as on March 31, 2015, to Rs 10,35,528 crore, as on March 31, 2018. With deterioration in asset quality and the progressive implementation of Basel III warranting higher buffers, troubled public sector banks (PSBs) received capital infusions via the issuance of recapitalisation bonds and budgetary support.
“The Reserve Bank’s revised prompt corrective action (PCA) framework became effective in April 2017. Eleven PSBs placed under this framework so far have been restricted in their operations and subjected to remedial action plan so as to prevent further capital erosion,” it said.
In order to curb NPAs, the RBI also put in place revised and harmonised guidelines for resolution of stressed assets during the year, replacing earlier schemes like Sustainable Structuring of Stressed Assets (S4A scheme), Strategic Debt Restructuring scheme (SDR), Corporate Debt Restructuring (CDR) scheme and Joint Lenders’ Forum (JLF). “Final guidelines relating to the net stable funding ratio (NSFR) were also issued in May 2018 to prepare the ground for banks to build durable buffers against potential liquidity disruptions,” it said.
‘Banned notes shredded and briquetted’
Mumbai: The Reserve Bank of India on Wednesday said demonetised bank notes of Rs 500 and Rs 1000 were verified, counted and processed in the sophisticated high speed Currency Verification and Processing System (CVPS) for accuracy and genuineness. These notes — worth Rs 15.31 lakh crore — were shredded and briquetted in the shredding and briquetting system, it said in its Annual Report
It said the processing capacity was augmented by resorting to night shifts (along with day shifts), working for 6 days a week, using 8 additional machines available with commercial banks and taking 7 machines on lease from vendors. “Diversion of SBNs from issue circles having surplus notes to issue circles having surplus processing capacity was also effected for ensuring near simultaneous completion of processing at all the issue offices of the bank,” the RBI said. —ENS