Banking Trends and Progress in India, 2021-22 Report

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Banking Trends and Progress in India, 2021-22 Report

  • Recently the Reserve Bank of India (RBI) has released the report ‘Trends and Progress of Banking in India, 2021-22’.
  • This report is a statutory publication relating to compliance with the Banking Regulation Act, 1949.
  • The report evaluates the performance of the banking sector including cooperative banks and non-banking financial institutions.

Key Findings of the Report

  • After a gap of seven years, the consolidated balance sheet of Scheduled Commercial Banks (SCBs) has registered double digit growth in the year 2021-22.
  • The gross non-performing asset (GNPA) ratio of SCBs was at its peak (9 per cent) in the year 2017-18. It has come down to 5.8 per cent by the end of March 2022.
  • Improvement has been observed in the financial performance of Urban Co-operative Banks. Indicators such as increasing capital buffer, declining GNPA ratio and improved profitability indicate this improvement.

Reasons for decline in NPA

  • Public Sector Banks (PSBs) are writing off loans.
  • Improvement in loans has been observed in Private Sector Banks (PVBs).
  • The share of large loans has come down.
  • Comparison between NPA and Debt write off

Write off the debt

  • If the borrower fails to repay the loan, the bank writes off the loan.
  • The chances of its recovery are very less.
  • The lender books such loans / NPAs as losses instead of assets in its balance sheet.
  • The absence of provisioning after loan write-off saves money and reduces tax liability.
  • Loan write off is different from loan waiver.
  • Under loan waiver, the loan account is completely cancelled.

Non-Performing Assets

  • A loan or advance for which the principal or interest has not been repaid for a period of 90 days from the due date.
  • It is the scale to measure the financial condition of any bank. If it increases, it becomes a matter of concern for the bank.
  • Non-performing assets (NPA) are a burden for any economy. They make the country’s banking system sick.

There are the following three categories of NPAs:

  • Substandard Assets: Non-performing assets of 12 months or less duration.
  • Doubtful Assets: 12 months sub-standard assets.
  • Loss Assets: Recovery from these becomes impossible.

Source – The Hindu

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