RBI releases Fiscal Stability Report

The bi-annual Fiscal Stability Report discussing issues relating to the development and regulation of the financial sector has been released by the RBI. The Fiscal Stability Report reflects the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC) on risks to the financial stability of the country, as also the resilience of the financial system.

Findings of the Fiscal stability Report

The December 2018 report has made the following observations:

  • Banking system’s asset quality has surprisingly started to show improvement. The gross non-performing assets (NPAs) have decelerated during September 2018 quarter.
  • The asset quality of Scheduled Commercial Banks (SCB) showed an improvement with gross non-performing assets (GNPA) ratio declining from 11.5% in March 2018 to 10.8% in September 2018 and the net non-performing assets (NNPA) ratio has also registered a decline during the period.
  • The number of banks with GNPA ratio less than 10% has gone down in September 2018 as compared to March 2018.
  • Due to the withdrawal of various restructuring schemes the Restructured standard advances (RSAs) ratio steadily declined in September 2018 to 0.5%.
  • The provision coverage ratio (PCR) of all SCBs was higher in September 2018 as compared to March 2018.
  • The capital to risk-weighted assets ratio (CRAR) of SCBs has declined marginally from 13.8% in March 2018 to 13.7% in September 2018.
  • Based on the Data, RBI predicts that projected GNPA ratio under the baseline scenario may decline from 10.8% in September 2018 to 10.3 per cent in March 2019.
  • Analysis of portfolio of Micro, Small and Medium Enterprises (MSMEs) shows that, the performance of PSBs in the MSME segment trails that of other intermediaries (private banks and non-banking financial companies (NBFC)).

The findings of the report suggest that the worst case scenario is over for PSBs especially the ones who are not included in PCA framework and it is expected that the earnings may see some jump in upcoming quarters.

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