Gross Non-Performing Assets (GNPA) Ratio

Why in News?

• Recently, the Gross Non-Performing Assets (GNPA) ratio, which declined to a seven-year low of 5% in September 2022, is expected to improve further to 4.9% by September 2023.

Highlights

• The ratio of GNPA to gross advances stood at 5.9% in March 2022. As of September 2022, the Net Non-Performing Assets (NNPA) ratio stood at a ten-year low of 1.3%, wherein the Private Sector Banks (PVBs’) NNPA ratio was below 1%.
• GNPA ratios of Public Sector Banks (PSBs) may rise from 6.5% in September 2022 to 9.4% in September 2023, whereas it would go up from 3.3% to 5.8% for PVBs and from 2.5% to 4.1% for Foreign Banks (FBs), under the severe stress scenario.
• Under the baseline scenario, the aggregate Capital to Risk Weighted Assets Ratio (CRAR) of major banks is projected to slip from 15.8% in September 2022 to 14.9% by September 2023.
• The Common Equity Tier-1 (CET1) capital ratio of some of the banks may decline from 12.8% in September 2022 to 12.1% by September 2023 under the baseline scenario
• NPA refers to a classification for loans or advances that are in default or are in arrears on scheduled payments of principal or interest.
• Banks are required to classify non-performing assets further into the following three categories based on the period for which the asset has remained non-performing and the realisability of the dues:
• Sub-standard Assets: A substandard asset is an asset classified as an NPA for a period less than or equal to 18 months
• Doubtful Assets: A doubtful asset is an asset that has been nonperforming for a period exceeding 18 months.
• Loss Assets: Loss assets are loans with losses identified by the bank, auditor, or inspector that need to be fully written off.