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Synopsis

* Gross Non-Performing Assets (GNPAs) of Scheduled Commercial Banks (SCBs) reduced by 25.6% y-o-y to Rs. 5.32 lakh crore as of June 30, 2023, due to lower slippages, steady recoveries & upgrades and writeoffs. Gross NPAs dropped in Q1FY24, despite a healthy growth of advances of 16.7% y-o-y in the same period. The GNPA ratio of SCBs reduced to 3.7% as of June 30, 2023, from 5.7% over a year ago.

* Net Non-Performing Assets (NNPAs) of SCBs reduced by 34.7% y-o-y to Rs. 1.25 lakh crore as of June 30, 2023. The NNPA ratio of SCBs reduced to 0.9% from 1.6% in Q1FY23 which is an all-time low.

* SCBs credit cost (annualised) declined by 16 basis points (bps) y-o-y to 0.52% in Q1FY24. Besides, it has been generally trending down from 1.44% in Q4FY21. Public Sector Banks (PSBs) 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 10 PSBs reduced by 22.4% y-o-y to Rs. 0.97 lakh crore as of June 30, 2023. Meanwhile, restructured assets of select six Private Banks (PVBs) declined by 48.5% to Rs. 0.17 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 (Ten PSBs + Six PVBs) as a percentage of net advances stood at 1.0% as of June 30, 2023, dropping by 60 bps over a year ago period.

* Provision Coverage Ratio (PCR) of SCBs expanded by 326 bps y-o-y to 76.5% Q1FY24 mainly due to improvement in overall asset quality and aggressive provisioning for non-performing assets on the books

Figure 1: SCBs – Improving Gross NPAs and Net NPAs Trend (Rs. Lakh – Cr)

The GNPAs of SCBs reduced by 25.6% y-o-y to Rs. 5.32 lakh crores as of June 30, 2023, Vs. Rs. 7.15 lakh crores over a year ago due to lower slippages, steady write-offs, and decent recoveries in the year. PSBs’ “Recoveries & Upgrades” from Q2FY23 to Q1FY24 (in the last four quarters) stood at Rs. 0.95 lakh crore as compared to 1.15 lakh crore in Q2FY22 to Q1FY23. Overall, the SCBs stress level has reduced on year on basis as their outstanding Special Mentioned Accounts (SMAs) have declined and the restructured book has also reduced significantly in Q1FY24, indicative of improving asset quality.

* GNPAs of PSBs reduced by 23.8% y-o-y to Rs. 4.05 lakh crore as of June 30, 2023 as slippages reduced significantly whereas write-offs were steady during the year and healthy recoveries & upgrades. Within this, other PSBs’ GNPAs reduced by 26.9% y-o-y to Rs. 1.36 lakh crore as of June 30, 2023.

* PSB slippages declined by 27.1% y-o-y to Rs. 0.26 lakh crore in Q1FY24. Whereas write-offs and recoveries were stable at Rs. 0.22 lakh crore and Rs. 0.20 lakh crore in the quarter.

* PVBs’ GNPAs reduced by 30.8% y-o-y to Rs. 1.27 lakh crore as of June 30, 2023. This was driven by other PVBs wherein their GNPAs reduced by 47.8% y-o-y to Rs. 0.58 lakh crore. While large PVBs’ GNPAs reduced by 4.4% y-o-y in the same period.  

The NNPAs of SCBs reduced by 34.7% y-o-y to Rs. 1.25 lakh crores as of June 30, 2023, vs. Rs. 1.91 lakh crores over a year ago. SCBs created provisions (in Profit & Loss A/C) of Rs. 1.35 lakh crore from Q2FY23 to Q1FY24 Vs. Rs. 1.46 lakh crore from Q2FY22 to Q1FY23.

* NNPAs of PSBs reduced by 36.2% y-o-y to Rs. 0.95 lakh crore as of June 30, 2023. While NNPAs of PVBs reduced by 29.4% y-o-y to Rs. 0.3 lakh crore as of June 30, 2023, within this the major reduction came from other PVBs which dropped by 38.1% y-o-y to Rs. 0.17 lakh crore.

* On the other hand, NNPAs of PVBs showed an increasing trend in Q1FY24 on a q-o-q basis, increasing by almost 3.8% during the quarter.

The reduction in the absolute stock of GNPAs along with rising advances has led to the GNPA ratio of SCBs reducing to 3.7% as of June 30, 2023, from 5.7% a year ago, and 7.6% as of June 30, 2021. Overall, it has been showing a consistent improvement over the last two years.

Figure 2: SCBs, PSBs PVBs – Gross NPAs Trend (%) 

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