MUMBAI: The banking sector has shown good signs with improvement in the gross nonperforming assets (GNPA), however, a fall in interest income adversely affected urban co-operative banks’ profitability among rural co-operatives. The financial health of state co-operative banks and district central cooperat ive banks weakened with a rise in the non-performing assets (NPAs) and slowdown in profitability, the Reserve Bank of India (RBI) said on Tuesday.
“The banking sector showed improvement with the GNPA ratio of scheduled commercial banks (SCBs) declining from 11.2 per cent in March 2018 to 9.1 per cent in March 2019 and a return to profitability in H1 of 2019- 20,” the RBI said The government has been infusing capital in some PSBs, which has been just enough to meet the regulatory minimum including capital conservation buffer (CCB). The deferment of the implementation of the last tranche of the CCB till March 31, 2020 has offered some breathing space to these banks.
“Their capacity to sustain credit growth in consonance with the financing requirements of the economy will,” it said. It also narrated that in the co-operative banking arena, the consolidated balance sheet of urban co-operative banks (UCBs) expanded in 2018-19 due to robust deposit growth, although, a fall in interest income adversely affected their profitability, among rural co-operatives, the financial health of state co-operative banks and district central co-operative banks weakened with a rise in NPAs and slowdown in profitability.
To strengthen the liquidity framework for NBFCs, a liquidity coverage ratio (LCR) has been introduced for all deposit- taking NBFCs and non-deposit taking NBFCs with an asset size of `5,000 crore and above. “The pace of credit expansion by NBFCs, which began slowing in 2018-19, continued in the H1 of 2019-20, largely affected by the performance of non-deposit taking systemically important NBFCs though capital buffers remained above the stipulated norms.
Bank credit remained a stable source of funding for NBFCs,” said the RBI. Further, this measure covering almost 87 per cent of the total NBFC sector by asset size will be implemented along a glide path spanning over four years, commencing from December 2020.