Gross non-performing assets (NPAs) of the scheduled commercial banks (SCB) saw a drop of almost a couple of percent, from 8.2 percent at end-March 2020 to 6.9 percent at the end of September 2021, the RBI said in its report on Trend and Progress of Banking in India 2020-21 released on December 28.

The return on assets (RoA) of banks improved from 0.2 percent at end-March 2020 to 0.7 percent at end-March 2021, supported by stable income and reduction in expenditure, the report said.

The report included the performance of the banking sector, including co-operative banks and non-banking financial institutions during the fiscals 2020-21 and 2021-22 to date.

According to the report, some of the RBI's policy responses to the COVID-19 pandemic have reached their pre-announced termination dates in 2021-22. As a result, certain liquidity measures have been phased out, while other regulatory measures, such as deferring the implementation of the net stable funding ratio (NSFR), imposing restrictions on bank dividend payouts, and deferring the implementation of the final tranche of the capital conservation buffer, have been realigned to avoid extended forbearance and financial stability risks while providing targeted support to needy sectors, according to the RBI.

“Even though the initiation of fresh insolvency proceedings under the Insolvency and Bankruptcy Code (IBC) was suspended for a year till March 2021, it constituted one of the major modes of recovery in terms of the amount recovered,” the RBI report said.

During the last fiscal year, the consolidated balance sheet of SCBs expanded in size, despite the pandemic and the resultant shrink in economic activity. In the current fiscal year so far, early signs of recovery can be seen in credit growth. Deposits increased by 10.1 percent at the end-September 2021 as against 11 percent a year ago, the RBI said.

The report further said that the balance sheet growth of urban co-operatives banks (UCBs) in the previous fiscal was mainly due to an uptick in deposits, while depressed credit growth speeded up investments. Also, financial indicators such as capital position and profitability decreased, the report said.

In addition, the profitability of state co-operative banks and district central co-operative banks enhanced in 2019-20, while their asset quality worsened, the report noted. It also said that the consolidated balance sheet of NBFCs increased in size in 2020-21, motivated by credit and investments of non-deposit taking systemically important NBFCs (NBFCs-ND-SI). “Their asset quality and capital buffers also improved,” the report said.