The Indian banking system is well-placed to support India’s growth story in the years ahead, RBI Governor Shaktikanta Das said.
The governor noted that RBI took a series of initiatives on the regulatory and supervisory fronts during the last five years, while banks themselves, to their credit, responded to the challenges by strengthening their internal defence mechanisms.
“As a result of these concerted efforts, there has been a gradual and consistent turnaround in the Indian banking system despite the multitude of headwinds emanating from Covid-19, geopolitical conflicts, and sharp monetarypolicy tightening in almost every country in the world,” Das said at a BFSI summit hosted by a publishing house.
The governor emphasised that all key indicators of scheduled commercial banks (SCBs), namely, capital adequacy, asset quality and profitability, have shown improvement in the last four years. The capital adequacy of banks has increased by 181 basis points (bps)from 14.8 per cent as of March 31, 2020 to 16.6 per cent as of September 30, 2023. The asset quality has also steadily improved, with gross non-performing assets decreasing from 8.3 per cent to 3.3 per cent and the provisioning coverage ratio increasing from 81.2 per cent to 91.9 per cent during the same period.
The profitability, as reflected in the return on assets and return on equity, too, has shown an increase of 119 bps and 1131 bps, respectively. The liquidity coverage ratio (LCR) of SCBs was comfortable at 135.4, much above the minimum stipulation of 100.
“The credit growth has now become broad-based and backed by the strong fundamentals of the financial institutions. The financial indicators of NBFCs are also in line with those of the banking system, as per the latest available data. On the whole, banking sector has emerged stronger from the unprecedented challenges of recent years,” Das said.
Fintech sector
The governor underscored that data on private equity flows into the digital lending space after the issuance of guidelines on digital lending (issued in September 2022) and on First Loss Default Guarantee demonstrates the faith of investors in the Indian digital lending story and the belief that, going forward, digital lending under the regulatory gaze of the Reserve Bank will spur the fintech sector even more.
“The regulatory objective was to rein in the negative externalities while retaining the salutary effects of innovative digital business models,” Das said.
