Banks’ NPA ratio likely to fall to 5-5.55% by March 2024: S&P

• S&P Global Ratings said non-performing loans of banks are expected to decline to 5-5.5% of total advances by March 2024.

Key highlights

• As per RBI’s latest Financial Stability Report, gross non-performing assets (GNPA) declined to six-year low of 5.9% in March 2022.
• Small and midsize enterprise sector and low-income households are vulnerable to rising interest rates and high inflation, but these risks are limited.

Risk management vital

• India’s economic growth prospects will strengthen over the medium term, with GDP expanding 6.5-7% annually in fiscal years 2024-2026.
• India’s healthy demographics and competitive unit labour costs, work in its favour.
• If risk management does not improve, the coming growth cycle would produce new sour loans.

Prelims Take Away

• NPA
• Financial Stability Report