The Reserve Bank of India (RBI) on Tuesday said that the gross non-performing assets (GNPAs) of Indian banks declined to 5 percent, however, the present macroeconomic environment can impact lenders' health, PTI reported.
Following the asset quality review, the GNPAs reached a peak in FY18. Since then, they have been dropping sequentially, reaching 5 percent in September as compared to 5.8 percent in March 2022, the RBI said in the "Trends and Progress of Banking in India" report for FY22 released on Tuesday.
Lower slippages and a fall in outstanding GNPAs due to recoveries, upgrades, and write-offs were both factors contributing to the decline in GNPAs, the report said.
However, the restructured assets ratio increased by 1.1 percentage points for all the borrowers and by 0.5 percentage points for large borrowers, according to the report. It added that the efforts to help individuals and small businesses with the loan recast scheme have been successful.
The reduction in the stock of GNPAs was caused by write-offs in the public sector banks in FY22, the report said, while in the case of private banks, loan upgrades were the main driver for asset quality improvements.
Further, all the bank groups showed a decline in the GNPAs, except the foreign banks, where the loss assets increased in FY22 to 0.5 percent from 0.2 percent in FY21, the report added.
The reliance on large borrowers for loans seems to be going down with the increase in the retail business, said the report, adding that accounts of over ₹5 crore accounted for 47.8 percent of the outstanding credit in FY22 as against 48.4 percent in FY21.
However, such accounts' contribution to overall dud assets improved more substantially to 63.4 percent of the overall NPAs in FY22 as against 66.4 percent in FY21, as per the report.
The consolidated balance sheet of scheduled commercial banks (SCBs) registered double-digit growth in 2021–22 after seven year with credit growth at a ten-year high in the first half of FY23, said the report, citing RBI.
On the other hand, the central bank raised concerns about the expansion of retail loans.
"Empirical evidence suggests that a build-up of concentration in retail loans may become a source of systemic risk," the RBI said.