India’s commercial banks’ non-performing assets shrank in 2023
Credit costs have declined, with public sector banks holding “substantial buffers”.
Scheduled Commercial Banks (SCBs) in India saw a decrease in bad assets in 2023 amidst ongoing efforts to clean up their balance sheets.
The gross non-performing assets (GNPAs) of India’s banks fell by 17.2% to Rs. 4.68 lakh crore as of 31 March, according to data released by CareEdge Ratings.
Net non-performing assets (NNPA) shrank by 23.8% year-on-year (YoY) over the same period, whilst the NNPA ratio reduced to 0.6%, an all-time low.
Credit costs have declined by 10 basis points (bps) to 0.52% as of Q4 FY2024. CareEdge Ratings noted that credit costs have been trending down from 0.87% since Q4 FY2022.
“Public Sector Banks (PSBs) have been holding substantial buffers for provisions over the last 6-8 quarters, which along with continuous improvement in the asset quality required a lower level of incremental provisioning, resulting in lower credit cost,” the report stated.
Restructured assets from 9 select PSBs dropped by 23.5% YoY as of 31 March, whilst restructured assets of selected five private banks (PVBs) declined by 29.2% due to repayments made by borrowers, an uptick in economic activities, and slipping of some accounts into the NPAs.
A separate report by S&P earlier revised the outlook of six Indian banks to positive.