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Synopsis

• Gross Non-Performing Assets (GNPAs) of Scheduled Commercial Banks (SCBs) reduced by 23.5% y-o-y to Rs.5.5 lakh crore as of March 31, 2023, due to lower slippages, “steady recoveries & upgrades” and write- offs. The GNPA ratio of SCBs reduced to 3.96% as of March 31, 2023, from 6.04% over a year ago. Robust growth in advances of 16.5% y-o-y is also supporting this reduction.

• Net Non-Performing Assets (NNPAs) of SCBs reduced by 34.0% y-o-y to Rs.1.3 lakh crore as of March 31, 2023. The NNPA ratio of SCBs reduced to 0.95% from 1.72% in Q4FY22 which is significantly better than pre-AQR levels of 2.1% (FY14).

• SCBs credit cost (annualised) declined by 16 basis points (bps) y-o-y to 0.6% in Q4FY23. Besides, it has been generally trending down from 1.4% in Q4FY21. The banks have been holding substantial buffers for provisions over the last 6-8 quarters along with continuous improvement in the asset quality required a lower level of incremental provisioning, resulting in lower credit cost.

• Restructured assets for select eight PSBs reduced by 24.7% y-o-y to Rs.1.0 lakh crore as of March 31, 2023, meanwhile select six PVBs declined by 50.1% to Rs.0.2 lakh crore due to repayments made by the borrowers, an uptick in the economic activities and also slipping some accounts into the NPAs. Restructured assets (eight PSBs + six PVBs) as a percentage of net advances stood at 1.07% as of March 31, 2023, dropped by 73 bps over a year ago period.

• PCR of SCBs expanded by 376 bps y-o-y in Q4FY23 mainly driven by PSBs on account of higher reduction rate in GNPAs as compared with accumulated provisions.

Asset Quality on Track to Reach Pre-AQR Levels

The GNPAs of SCBs reduced by 23.5% y-o-y to Rs.5.5 lakh crores as of March 31, 2023, vs Rs.7.3 lakh crores over a year ago. PSBs accounted for 77.2% of aggregate GNPAs compared to 61.4% of advances. Overall, the SCBs stress level has reduced as their outstanding SMAs have declined and the restructured book has reduced significantly in Q4FY23, indicative of improving asset quality.

Figure 1: PSBs - Gross NPAs and Net NPAs (Rs. Lakh – Cr)

GNPAs of PSBs reduced by 21.0% y-o-y to Rs.4.3 lakh crore in Q4FY23 due to lower slippages, steady recoveries & upgrades, and write-offs. PSBs slippages declined by 37.5% y-o-y to Rs.0.22 lakh crore in Q4FY23. PSBs write- offs and recoveries were stable at Rs.0.18 lakh crore and Rs.0.29 lakh crore in the quarter.

Figure 2: PVBs - Gross NPAs and Net NPAs (Rs. Lakh – Cr)

GNPAs of PVBs reduced by 30.9% y-o-y to Rs.1.3 lakh crore in Q4FY23 due to higher recoveries & upgrades. The slippages of 15 PVBs reduced by 0.5% to Rs.0.18 lakh crore in the quarter.

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