The gross non-performing asset (GNPA) ratio of Indian banks fell to a 12 year low of 2.8% in March 2024 and is expected to reduce further down to 2.5% by the end of the financial year 2024-25, according to the RBI’s Financial Stability Report released on Thursday.

Bad loans have fallen and bank provisioning for bad loans have increased (HT Image)

What is the gross non-performing asset ratio for banks?

This ratio refers to the proportion of the total value of bad loans, which are bank loans that are unlikely to be repaid (also known as gross non-performing assets), to the total assets the bank has or the total loans it has given.

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A lower GNPA ratio means the number of loans that may go unpaid are less and can be a positive indicator.

In September, the ratio was 3.2%, highlighting a significant improvement now.

What is the net non-performing asset ratio for banks?

The net non-performing asset (NNPA) ratio also declined to 0.6% this March, compared to 0.8% last September.

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The net non-performing asset (NNPA) ratio is the proportion of bad loans which the bank has actually created a provision for, compared to the total assets of the bank.

What type of bank loans are these?

Total loans given by banks increased during the second half of the financial year 2023-24 in public sector banks and foreign banks, while it moderated for private banks.

Loans to the services sector the services sector as well as personal loans saw the most increase among all banks.

Personal loans accounted for more than half of private banks’ credit growth, which was led by housing loans, followed by other personal loans.

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