Mumbai: The country's financial system "remains stable" despite recent setbacks and the non-performing assets (NPAs) cycle has "turned around" with a sharp reduction in the ratio of dud assets to 9.3%, the Reserve Bank said in the Financial Stability Report.
The NPA has "turned around" with a sharp fall in the system-wide NPAs to 9.3% in March 2019 from 11.2% a year ago,the bi-yearly report said. The NPAs ratio is expected to narrow down further to 9% in March 2020 as per the baseline scenario, it said.
The share of the state-run banks in the overall NPAs was at an elevated 12.6%, but is likely to come down to 12% by March 2020. "The country's financial system remains stable despite some dislocation of late," the report said, probably alluding to the troubles being faced by the non-banking lenders.
However, the financial market risks continue to be perceived as a "high-risk category" affecting the system, while global risks, and risk perception on macroeconomic conditions as also institutional risks are perceived medium, it said.
The report said the market has got a "discipline" among NBFCs, wherein better performing ones continue to raise funds while those with asset-liability mismatch and asset quality concerns are subjected to higher borrowing costs. Resilience of the banks has increased with a sharp improvement in the provision coverage ratio of all banks to 60.6% in March 2019.
