BE/RBINOTE/55/2019
- The Reserve Bank of India Governor has informed that there is ofcourse there is sizeable decline in the NPAs in the recent days, however, the provision coverage ratio has gone to 60.5% which was 48.3% a year ago.
- Also the capital adequacy ratio in the banking system also has gone above the BASEL requirements.
- Also the Public Sector Banks control over 60% of India’s banking industry and they are owned by the Government of India and the RBI has a limited supervision and legal powers in bringing about changes in the management, which is not the case with the Private Sector Banks which hold more authority in such matters. This obviously creates an imbalance resulting in raising various questions on the ability of the Central Bank regulations over that of State run institutions.
- India’s Banking sector has the highest ratio of stressed assets in the world with many bad loans mainly in the Energy and Steel sectors.
- Also, the Governor added that a crisis in the NBFCs has also been a matter of concern, since banks hold around 7% of their loans to Non Banking finance companies resulting in fresh outbreak of debt defaults.
Note:
The provision coverage ratio (PCR) is one which gives an indication of the provision made against bad loans from the profit generated. Higher the PCR, lower is the unexposed part of the bad debts.
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