Context:
RBI’s Financial Stability Report (FSR) highlights achievements in Non- Performing Assets (NPA)
Financial Stability Report:
- Released by – Reserve Bank of India (RBI), twice a year.
- It details the state of financial stability in the country
- It is prepared after taking into account the contributions from all financial sector regulators.
- As part of the FSR, RBI also conducts a Systemic Risk Survey (SRS), whereby it assess the financial system on 5 different types of risks – Global, Financial, Macroeconomic, Institutional and General
Key Highlights:
- Despite facing heightened risks from prolonged geopolitical tensions, global economy has remained resilient.
- The Indian economy and the financial system remain robust and resilient, anchored by macroeconomic and financial stability.
- Gross NPA ratio of Scheduled Commercial Banks has declined to a multi-year low of 2.8% and the net non-performing assets (NNPA) ratio to 0.6 per cent at end-March 2024.
- Non-Performing Assets (NPA) – Loans and arrears lent by banks or financial institutions whose principal and interests are delayed beyond 90 days.
- Capital to Risk Weighted Assets Ratio (CRAR) of scheduled commercial banks (SCBs) stood at 16.8 which is way higher than the minimum capital requirement which is 9 per cent.
- CRAR – Ratio of a bank’s capital to its risk-weighted assets and current liabilities.
- The higher a bank’s CAR, the more likely it is to be able to withstand a financial downturn or other unforeseen losses.
- Non-banking financial companies (NBFCs) remain healthy, with CRAR at 26.6 per cent, GNPA ratio at 4.0 per cent and return on assets (RoA) at 3.3 per cent, respectively, at end-March 2024.
- Non-Banking Financial Company (NBFC) – A company registered under the Companies Act, 1956 engaged in the business of loans and advances.
Source: RBI
Previous Year Question
With reference to ‘Urban Cooperative Banks’ in India, consider the following statements:
1. They are supervised and regulated by local boards set up by the State Governments.
2. They can issue equity shares and preference shares.
3. They were brought under the purview of the Banking Regulation Act, 1949 through an Amendment in 1966.
Which of the statements given above is/are correct?
[UPSC Civil Services Exam – 2019 Prelims]
(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Answer: (b)
Explanation:
Statement 1 is incorrect. The Urban Banks Department of the Reserve Bank of India is vested with the responsibility of regulating and supervising Urban Cooperative Banks (UCBs).
