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Banking industry on 'course to recovery' as NPAs declined: Shaktikanta Das

Indicating that the banking sector is on course to a recovery, Reserve Bank of India (RBI) governor Shaktikanta Das has said the period till September 2018 had seen a decline in gross non-performing asset (NPA) ratios - a first such dip in three years. Governor underlined that after a prolonged period of stress, the banking sector appears to be on course to recovery as the load of impaired assets recedes, adding that state-run lenders, which account for a bulk of the dud assets, need operational improvements.

According to RBI's half-yearly financial stability report (FSR), the asset quality of banks showed an improvement, with Gross NPAs ratio declining to 10.8% in September 2018 from 11.5% in March 2018, while for the state-run lenders, the same improved to 14.8% in September 2018 from close to 15.2% in March 2018. The RBI Governor expressed hope that the GNPA ratio of all banks would come down to 10.3% by March 2019 from 10.8% in September 2018. In the last financial year (FY18), gross NPAs of the banking system shot up to Rs 10,39,700 crore, or 11.2% of total advances as against Rs 791,800 crore or 9.3% of advances in the same period of previous year(FY17).

Besides, he said even though the current NPA levels were high, stress tests done by the RBI had pointed to an improvement in the ratio in future. The immense effort put in by the stakeholders so far is required to be buttressed with substantive reforms in governance and oversight regime, supported by recapitalisation of weak PSBs.

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