On December 29, 2020, Reserve Bank of India (RBI) released “Report on Trend and Progress of Banking in India 2019-20” under the broad theme of impact of COVID-19 on banking and non-banking sectors, and the way forward. This report for the year ended June 30, 2020 has been submitted to the Central Government in terms of Section 36(2) of the Banking Regulation Act, 1949.
- The report presented the performance of the banking sector, including co-operative banks, and non-banking financial companies (NBFCs) during 2019-20.
- The Gross non-performing assets (GNPA) ratio of banks declined from 9.1% of total assets at end-March 2019 to 8.2% at end-March 2020 and further to 7.5% at end-September.
Here are the highlights of the report:
-During 2019-20 and the first half of 2020-21, scheduled commercial banks (SCBs) consolidated the gains achieved after the turnaround in 2018-19.
—Capital to risk-weighted assets (CRAR) ratio of SCBs strengthened from 14.3% at end-March 2019 to 14.7% at end-March 2020 and further to 15.8% at end-September 2020,
–Net profits of SCBs turned around in 2019-20 after losses in the previous two years; in H1:2020-21, their financial performance was shored up by the moratorium.
–The Insolvency and Bankruptcy Code (IBC) and the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI) channel aided the process of NPA recovery.
–The balance sheet growth of Urban Co-operative Banks (UCBs) moderated in 2019-20. Their asset quality deteriorated, increased provisioning resulted in net losses.
–The performance of state co-operative banks improved, both in terms of profitability and asset quality.
–The consolidated balance sheet of NBFCs decelerated in 2019-20 due to near stagnant growth in loans and advances although some improvement became visible in H1:2020-21.
–On frauds in the banking sector, the report said, operational risk has emerged as a major source of risk. Although 98 per cent of frauds in terms of value were related to loans, their occurrence was spread over several previous years.
–The amount involved in frauds (Rs 1 lakh and more) was Rs 64,681 crore in the first half of the current fiscal, down from 1,13,374 crore in April-September 2019-20 period. The number of cases of fraud too were lower at 3,488 during April-September 2020-21 as compared to 4,410 in the corresponding period of last fiscal.
–Banks also recovered over Rs 1.72 lakh crore (of over Rs 7.42 lakh crore NPAs) during 2019-20 through channels like Lok Adalats, DRTs, SARFAESI Act and IBC.
Recent Related News:
i.RBI also decided that banks can lend up to Rs 7.5 crore from earlier Rs 5 crore to individual retail and small business borrowers (i.e. with turnover of upto Rs 50 crore) and still be eligible for a 75% risk weight.
ii.RBI also extended the enhanced borrowing facility provided to banks under the marginal standing facility (MSF) scheme by six months till March 31, 2021. It was initially available up to June 30, 2020 and was later extended up to September 30, 2020 due to economic disruptions amid COVID-19.
About Reserve Bank of India (RBI):
Formation– 1 April 1935
Governor– Shaktikanta Das
Headquarters– Mumbai, Maharashtra
Deputy Governors– 4 (Bibhu Prasad Kanungo, Mahesh Kumar Jain, Michael Debabrata Patra, and M Rajeswar Rao)