Gross non-performing assets just 2.7% of total assets at end of June 2024

Michael Debabrata Patra, Deputy Governor, Reserve Bank of India has noted in speech that since 2018, India has engaged intensely in fortifying the soundness of financial institutions and building up adequate capital and liquidity buffers. Through a variety of processes including recognition, restructuring, resolution and write-offs, impairment in banks' balance sheets has been brought down. Gross non-performing assets were just 2.7 per cent of total assets at the end of June 2024. Adjusted for provisions, the net non-performing asset ratio was only 0.6 per cent. As against the Basel minimum capital adequacy ratio of 8 per cent, India applies a minimum ratio of 9 per cent with a minimum of 7 per cent for Tier I capital. A capital conservation buffer of 2.5 per cent has to be maintained in addition to the minimum capital requirement, taking the overall regulatory capital requirement to 11.5 per cent of total risk weighted assets. At the end of June 2024, banks in India maintained a capital ratio of 16.7 per cent with Tier I capital of 13.9 per cent. Other buffers include the liquidity coverage ratio, which is well above 100 per cent, and the provision coverage ratio which is close to 80 per cent. Macro stress test reveals that no bank in India will fall below the regulatory minimum capital even under a severe stress scenario.

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