Gross NPAs will fall to 2.5% in FY25 from a 12-yr low of 2.8% in FY24: RBI

Under the baseline stress scenario, the GNPA ratio of all banks may improve to 2.5 by March 2025. If the macroeconomic environment worsens to a severe stress scenario, the ratio may rise to 3.4, the half yearly report said. In the severe stress scenario, the GNPA ratios of public sector banks may increase from 3.7 in March 2024 to 4.1 in March 2025, whereas it may go up from 1.8 to 2.8 for private sector bank and from 1.2 to 1.3 for foreign banks.

Stress tests are conducted covering credit risks, interest rate risks and liquidity risks and the resilience of banks in response to these shocks. Using the stress tests, the RBI projects impairment or bad loans and capital ratios over a one-year horizon under a baseline and two adverse scenarios–medium and severe.

The report further says stress test results reveals that banks are well capitalised and capable of absorbing macroeconomic shocks even in the absence of any further capital infusion by stakeholders.

The half-yearly slippage ratio which is the new bad loan accretions as a share of standard advances fell across bank groups. Though the amount of write-offs declined during the year, the write-off ratio remained almost at the same level as a year ago, due to reduction in GNPA stock, the central bank said.