Economic Survey: Banking sector performance remains subdued in current FY

Situation likely to improve with banks diligently following on recoveries

Weighed down by a pool of bad loans, performance of the banking sector, especially of public sector banks, has remained subdued in the current financial year, according to the Economic Survey. But, the situation is likely to improve with banks diligently following on recoveries and stressed asset resolution. Early signs of a pick-up in credit demand, especially from industry, also give room to expect a change in the state of affairs.

According to the Economic Survey for 2017-18, tabled in Parliament on Monday, the gross non-performing advances (GNPA) ratio of scheduled commercial banks (SCBs) increased from 9.6 per cent to 10.2 per cent between March 2017 and September 2017.  But, their restructured standard advances (RSA) ratio declined from 2.5 per cent to 2.0 per cent. The stressed advances (SA) ratio rose marginally from 12.1 per cent to 12.2 per cent during the period.

The situation for state-owned banks remained precarious. Their GNPA increased from 12.5 per cent to 13.5 per cent between March and September 2017. The Stressed advances ratio of PSBs rose from 15.6 per cent to 16.2 per cent. Referring to finance companies, the survey said the gross NPA ratio (per cent to advances) of the NBFC (non-banking financial company) sector declined to 5.5 per cent as of September-end 2017 from 6.1 per cent as of March 31, 2017. The net NPA (per cent to net advances) also decreased to 3.4 per cent from 4.1 per cent.

Credit to industry picking up

Non-food credit (NFC) grew at 8.85 per cent year-on-year in November 2017 compared to 4.75 per cent in November 2016. Bank credit lending to services and personal loans segments continues to be a major contributor to overall NFC growth. Credit growth finally picked up in the industrial sector after remaining persistently negative from October 2016 to October 2017. However, growth of credit to medium scale industries has remained negative since June 2015, the survey added.