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.
- 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