Why in News?

• Recently the Reserve Bank of India (RBI) released a report on the trend and progress of banking in India in 2021-22.

Key Highlights:

• The Report is a statutory publication in compliance with Banking Regulation Act, 1949.
• Observations of the report-
  • Consolidated balance sheet of Scheduled Commercial Banks (SCBs) registered double digit growth in 2021-22.
  • By March-2022, the gross non-performing asset (GNPA) ratio for all SCBs has improved to 5.8% from 7.3% in 2020-21.
  • Overall reduction in GNPAs for all bank groups, except foreign banks, during 2021-22.
  • Financial performance parameters such as capital buffers, Capital-to-risk weighted Asset Ratio, Slippage Ratio etc. showed improvement.
• Reasons for declining NPA-
  • Reduced Share of large borrowings.
  • Loan write-off by public sector banks.
  • Upgradation of loans in private banks.

Asset Classification of SCBs

• Standard Asset
  • Borrower is repaying the principal and interest in timely fashion.
• Special Mention Accounts (SMAs)
  • SMA-0: Loan principal or interest unpaid for 1- 30 days from its due date.
  • SMA-1: Unpaid for 31-60 days.
  • SMA-2: Unpaid for 61-90 days.
• Non-Performing Asset (NPA).
  • If loan principal or interest is not paid for more than 90 days from its due date.
  • Net NPA= GNPA- Provisioning.
• Substandard Assets
  • If NPA for less than or equal to 12 months.
• Doubtful Assets
  • Substandard assets for a period of 12 months.
• Loss Assets
  • Asset which has little/no salvageable value.
• Loan write-off
  • Bank writes off a loan after the borrower has defaulted on loan repayment and there is a very low chance of recovery.
  • Loan write off saves money from provisioning and reduces tax liability.