RBI on Thursday said the asset quality of banks has improved in the January-March quarter this year with the gross non-performing assets (NPA) ratio declining to 3.4 per cent of total loans outstanding, from 3.6 per cent in the July-September quarter last year.
This had a positive impact on the net NPAs of banks, which improved to 1.4 per cent of total loans outstanding in the March quarter, from 1.6 per cent six months ago in the September quarter, RBI said in its biannual Financial Stability Report (FSR) released on Thursday.
"The improvement was due to lower slippages, improved recovery, and higher write-offs during the March quarter."
However, the regulator noted that the change in the classification norms for restructured loans from April 2015 will have some adverse impact on the NPAs, unless banks take preventive measures.
The gross NPAs of the public sector banks (PSBs) were the highest and stood at 3.8
Had it not been for the improvement in the quarterly slippages in March, this would have been higher for the PSBs, RBI said, adding in the January-March period, their quarterly slippages improved by 0.5 per cent from 0.8 per cent in the September quarter.
The old private sector banks recorded the highest recovery during the period, at 21.2 per cent, followed by PSBs at 9.1 per cent. The report blamed seasonality factor for the higher slippages in the March quarter, which traditionally sees higher bad loans.
The report noted that the loan recast too declined in the March period to 5.7 per cent from 5.9 per cent in the September quarter. Again this chart is led by the PSBs with their CDR (corporate debt restructuring) ratio standing at 7.1 per cent during the period.
On origin of the loan restructuring, the report noted that the most of them came from the manufacturing and services sector borrowers. Within the industrial sector steel, textiles, infrastructure, power generation, and telecoms led the CDR chart, while the services space is topped by the aviation sector.
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