Indian banking sector has begun to show with the improvement in asset quality of scheduled commercial banks (SCBs) during July-September quarter this year, says the Reserve Bank of India (RBI) governor Shaktikanta Das on Monday.
The governor, in RBI's Financial Stability Report, said, "India's financial system remains stable, and the banking sector shows signs of improvement, even though the global economic environment and the emerging trends in financial sector pose challenges," Reserve bank of India said in its eighteenth issue of the FSR.
This positive sentiment was attributed to a host of factors including credit growth of banks coupled with improvement in the asset quality of the banks.
The FSR reflects the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC) on risks to financial stability, as also the resilience of the financial system. The Report also discusses issues relating to development and regulation of the financial sector.
According to the report, credit growth of scheduled commercial banks (SCBs) has improved between March 2018 and September 2018, driven largely by private sector banks.
Besides, the asset quality of banks showed an improvement with the gross non-performing assets (GNPA) ratio of SCBs declining from 11.5 per cent in March 2018 to 10.8 per cent in September 2018, the report highlighted.
The report also projected that GNPA ratio may decline to 10.3 per cent in March 2019, from 10.8 per cent in September 2018, under the baseline scenario.
Based on the analysis of the financial network structure for the period September 2017 - September 2018, the RBI report showed a shrinking inter-bank market and increasing bank linkages with asset management companies-mutual funds (AMC-MFs) for raising funds and with NBFCs for lending.
Meanwhile, the RBI report said global growth outlook for 2018 and 2019 was "steady". However, the central bank added that downside risks rose due to tightening of financial conditions in Advanced Economies, and increasing protectionist trade policies and global geopolitical tension.
Edited by Chitranjan Kumar