In a significant boost to the banking sector, Gross Non-Performing Assets (GNPAs) of Scheduled Commercial Banks (SCBs) have reduced by 15.2% year-on-year, falling to Rs 4.57 lakh crore as of June 30, 2024, according to the latest CareEdge report. The GNPA ratio also witnessed a substantial decline, standing at 2.8% compared to 3.8% a year earlier. This marks a continued improvement in asset quality across India’s banking landscape.
Net Non-Performing Assets (NNPAs) have shown an even steeper reduction, dropping by 24.9% year-on-year to Rs 1 lakh crore by June 30, 2024. The NNPA ratio fell to a historic low of 0.6%, down from 1.0% in the previous year.
Credit costs for SCBs have also improved, with the annualized credit cost dropping by 11 bps year-on-year to 0.41% in Q1 FY25.
Public Sector Banks (PSBs) have been holding substantial buffers for provisions over the last 6-8 quarters, which along with continuous improvement in the asset quality required a lower level of incremental provisioning, resulting in lower credit costs. Restructured assets for select nine PSBs reduced by 24.7% y-o-y to Rs. 0.64 lakh crore as of June 30, 2024.
The Provision Coverage Ratio (PCR) of SCBs expanded by 281 bps y-o-y to 78.1% Q1FY25 mainly due to improvement in overall asset quality, driven by a reduction in NPAs, lower slippages compared to recoveries/write-offs.