Bad loans main pain area for resilient economy: RBI
Strong macroeconomic fundamentals offer India a “reasonable degree of resilience” to fight uncertainties, but poor asset quality of banks and managing expectations are key challenges for regulators and the government, says the Financial Stability Report.
“There has been a significant improvement in the macroeconomic environment, and going forward, economic performance is expected to be better,” the six-monthly FSR released by the Reserve Bank said on Thursday.
However, managing expectations is a challenge for policymakers as the recovery in business sentiment has not taken roots, the report has warned.
“A relatively stronger <g data-gr-id="25">macro-economic</g> fundamentals in terms of growth, inflation, and current account and fiscal deficits provide a reasonable degree of resilience to our financial system,” it said.
Gross non-performing assets (NPAs) in the banking system have grown to 4.6 <g data-gr-id="32">per cent</g> at the end of March this year from 4.5 <g data-gr-id="33">per cent</g> in September 2014, while the stressed advances including standard restructured loans have risen to 11.1 per cent from 10.7 per cent, the report said.
Stating that the rising NPA situation has not bottomed out, the report warned that asset quality deterioration is likely to continue for a few more quarters.
On a sectoral level, mining, iron & steel, textiles, infrastructure and aviation sectors contributed highest to asset quality stress, with such advances at 17.9 <g data-gr-id="26">per cent</g>, the report said.
“While risks to the banking sector have moderated marginally since September 2014, concerns remain over the continued weakness in asset quality and profitability,” the FSR said.
Warning that further deterioration in asset quality can “adversely affect the health of the banking system”, it said under the baseline scenario, stress tests have shown that the GNPAs may increase marginally to 4.8 per cent in the September quarter of the current fiscal and then improve to
4.7 <g data-gr-id="38">per cent</g> by the March 2016 quarter.
Rs 100 bank notes to have extra security feature
With an enhanced security feature, currency notes of Rs 100 denomination would now come with numerals in ascending size in the number panels, Reserve Bank said on Thursday. RBI has issued Rs 100 denomination banknotes in Mahatma Gandhi Series-2005 with this type of new numbering pattern. Now the numerals in both the number panels of these banknotes will be in ascending size from left to <g data-gr-id="52">right,</g> while the first three alphanumeric characters (prefix) will remain constant in size, RBI said. “Printing the numerals in ascending size is a visible security feature in the banknotes so that the general public can easily distinguish a counterfeit note from a genuine one,” RBI said.