NPAs in Small Finance Banks under control: RBI

New Delhi, Jan 22 (KNN) The Reserve Bank of India (RBI) has said that the Small Finance Banks (SFBs) have been able to keep Non-Performing Assets (NPAs) under control through relatively better management of their portfolios.

The Apex bank in its report released on Thursday also asserted that the expansion of SFB branches has been concentrated in the same areas as private banks.

''Creditable features associated with microfinance have been its lower loan defaults, which have been made possible by  better management and   supervision of the credit portfolio through the employment of social collateral of self-help groups. SFBs, many of which were erstwhile NBFC-MFIs, too have reported low NPA ratios,'' the report added.

Furthermore, the dispersion in the NPA ratio among SFBs has also declined over time. In the near future, the NPA positions in SFBs, as in other banks, may be shaped by various regulatory interventions, including the moratorium and resolution framework, introduced to address Covid-related stress. In the case of micro, small and medium enterprises (MSMEs), the Covid-related resolution framework has been aligned with the MSME restructuring package announced earlier in January 2019.

''Effectively, this has ensured a continued regulatory support to MSMEs, which form a major part of the loan portfolio of SFBs,'' the report said.

While the deposit base of SFBs has been expanding, they still have a long distance to cover as compared to other SCBs in mobilisation of current and savings accounts or CASA. While there has been a pick-up in the share of CASA in total deposits for SFBs, it stood at 15 per cent in March 2020 as compared to 41 per cent for other SCBs.

While there has been a rapid expansion in the branch network of SFBs, their branches, similar to PVBs, are concentrated in regions/states that are already well-banked.  These include the southern, western and northern regions.  More specifically, the states with high concentration of SFB branches are Tamil Nadu, Maharashtra, Karnataka, Kerala and Punjab, which have a much lower population per bank branch as compared to the national average.

SFB branches also display concentration in the urban and semi-urban centres or more specifically Tier 1 to Tier 3 centres having populations of 20,000 persons  and  above. Tier 5-6 (rural) centres with a population of less than 10,000 persons accounted for only about 18 per cent of the SFB branches in March 2020.