Banks log 12.2% growth in FY23, gross bad loans down for 5th year: RBI report
The regulator said that it is reviewing the non-fund based facilities offered by banks such as guarantees and letters of credit to come up with guidelines as they form an important role in the growth and development of the economy.
Banking industry's clean up continued for the fifth straight year as the fall in gross bad loans helped report a higher net interest margin, a key measure of profitability. All banks meet the regulatory capital requirements with it at 16.8% as of September.
«Lower slippages helped improve asset quality across all bank groups, with gross bad loans to total advances ratio of banks dropping to a 10-year low,'' the RBI said in its annual Report on Trend and Progress of Banking in India.
„Higher lending rates and lower provisioning requirements helped to improve the profitability of banks and shored up their capital positions.''
Indian banks are having their best run in more than a decade after getting hobbled by bad loans when they unmindfully went into infrastructure funding compromising on the asset-liability management. The government had to come up with a fresh bankruptcy law and banks had to raise lakhs of crores of rupees in capital to survive the wave of defaults.
The situation has since improved.
Banks' gross bad loans have fallen to 3.2 percent of advances from double digits. The growth in loans now is driven more by retail loans which has led to the central bank coming up with prudential measures.
It recently raised capital requirements for certain unsecured loans to slow its growth. But it was more a precaution than due to worries.
“The asset quality of the unsecured retail loans has not shown any deterioration so far,'' the report said.
