New Delhi, Jan 1 (KNN) The ratio of bad loans has improved from last year and is expected to further decline in March 2019’s financial results, said Reserve Bank of India (RBI) in its report.

RBI governor Shaktikanta Das has, however, said that despite the improvement, the current levels of bad loans are still too high for comfort. 

 “After a prolonged period of stress, the banking sector appears to be on course to be on course to recovery as the load of impaired assets recedes — the first half-yearly decline in gross NPA ratio since September 2015, and improving Provision Coverage Ratio, being positive signals. Stress test results suggest further improvement in NPA ratio,” said Das in a foreword to the report.

Biannual financial stability report (FSR) released by the RBI said that the gross non-performing assets (GNPA) ratio of banks has declined to 10.8% in September 2018 from 11.5% in March 2018.

Further stress tests undertaken by the RBI show that under its baseline scenario, the GNPA ratio may decline from 10.8% in September 2018 to 10.3% in March 2019.

The RBI report said that the lenders, public sector banks’ GNPAs may drop to 14.6% in March 2019 from 14.8% in September under a baseline stress scenario, while for private banks the ratio could drop to 3.3% from 3.8%.

The risks being posed by financial conglomerates (FCs) where intra-group transactions create opportunity for regulatory arbitrage, Das highlighted.

“The framework for oversight of FCs requires closer attention,” Das said in the report.

The report highlighted that large borrowers account for a bulk of the bad loan problem in banks.

The top 100 large borrowers accounted for 16% of gross advances and 21.2% of GNPAs of all banks.

Large borrowers took 54.6% of bank loans, but their share was 83.4% of all bad loans.