Banks' Q1 results show seeds of asset quality stability: RBI

Reserve Bank of India's Deputy Governor S.S.Mundra on Wednesday said initial trends from commercial banks' first quarter results indicate some stability on their non performing assets (NPAs), or distressed loans, front.

"We are seeing that there is some stability now in the NPA levels. So we will have to keep a constant watch on how things are developing," Mundra told reporters on the sidelines of an event here.

However, only a few banks have reported their first quarter numbers till date, he noted.

"We have yet to see more banks come out with their results. So it's a little early to make a definitive statement.

"The only thing which can reduce NPAs is the way business is done..nothing else can. Any other method would not be right also. It has to be done by right business practices and right risk management," Mundra said.

In this regard, the government is working on a comprehensive package to help stressed state-run banks and improve the flow of credit for industry, Minister of State for Finance Jayant Sinha said earlier this month.

The minister said the government was trying to improve corporate governance and strengthen management at state-run banks.

According to the RBI, gross NPAs as a ratio of total loans could rise to 4.8 percent by September from 4.6 percent in March.

The government has agreed to pump in about $3 billion into banks during the current fiscal towards their capitalisation.

Finance Minister Arun Jaitley last month said his ministry is currently preparing a list of projects stalled due to lack of finance to set in motion the process of their revival and thus bring down the NPAs of banks.

Gross non-performing assets, or distressed loans, of state-run banks have gone up to Rs.260,531 crore as in December 2014. In the fourth quarter (January-March 2015), NPAs had come down from 5.64 to 5.2 percent.