RBI flags rising risks in consumer lending

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₹50,000 had at least one overdue personal loan. Das said the health of the financial system is steadily improving on the back of multi-year high earnings, low level of stressed assets, and strong capital and liquidity buffers at financial institutions. “We have made significant progress since the onset of the covid-19 pandemic in steering the economy and the financial system.

Now is the time to consolidate these gains and enable the economy to move to a higher growth trajectory with macroeconomic and financial stability," said Das. Meanwhile, in its stress analysis, RBI found that the gross non-performing asset (GNPA) ratio of banks might improve to 3.1% by September 2024 under the baseline scenario, from 3.2% reported as on 30 September. In case the external environment worsens to a medium or a severe stress scenario, the GNPA ratio could rise to 3.6% and 4.4%, respectively.

Under the baseline scenario, state-owned banks may see the maximum decline in bad loan ratio—down 30 basis points (bps)—between September 2023 and September 2024, albeit on a higher base. RBI conducts macro stress tests to assess the resilience of bank balance sheets to unforeseen shocks. The results come with a disclaimer that the adverse scenarios are stringent conservative assessments under hypothetical adverse economic conditions and, therefore, the model outcomes should not be interpreted as forecasts.

As pointed out on Wednesday in the Report on Trends and Progress of Banking in India, gross bad loans as a percentage of total loans fell from 5.8% in 2021-22 to 3.9% in 2022-23, and further to 3.2% as on 30 September. The 3.2% bad loan ratio, RBI said on Thursday, was an 11-year low. Stress tests for credit risk, the report said, found that