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MUMBAI : India’s banking system has weathered the economic shock from the covid pandemic well so far, but there is some lagged impact on the way, Economic Survey 2021-22 said.

Gross non-performing assets ratio (GNPA) of banks declined to 6.9% at the end of September 2021 from 11.2% at the end of FY18, while net non-performing advances (NNPA) ratio declined to 2.2% from 6% during the same period.

The stressed advances ratio of banks, however, rose to 8.5% at the end of September 2021 from 7.9% at the end of September 2020.

“Various covid-19 related dispensations/moratoriums provided with respect to asset quality contributed to the increase in restructured assets and as a result, stressed advances ratio for the banking system increased at end-September 2021. Overall, the banking system appears to have weathered the pandemic shock well, even if there is some lagged impact still in the pipeline," the survey said.

The Reserve Bank of India had allowed a six-month moratorium on repayment of loans from March 2020 to August 2020. The central bank had also announced one-time restructuring schemes for large borrowers, and also for individuals and small businesses affected by the pandemic.

The survey said that capital to risk-weighted asset ratio (CRAR) of banks stood at 16.54% at end-September 2021, steadily improving from 13% in 2013-14. The improvement in CRAR levels of public sector banks was due to capital infusion by the government alongside fundraising from the markets, while private sector banks tapped capital from market sources, the survey said. The Return on Assets (RoA) and Return on Equity (RoE) for public sector banks became positive in June 2020 and remained positive for the period ending September 2021, after recording negative profitability ratios from March 2016 to March 2020.

The survey also said that the transmission of lower borrowing costs has been slightly higher at public sector banks than private sector banks, though it was higher for private banks in the April-November 2021 period. The weighted average lending rate (WALR) on outstanding rupee loans fell by 135 bps for public sector banks and 123 bps for private banks, while that on fresh rupee loans fell by 210 bps for public sector banks and 177 bps for private sector banks during February 2019-November 2021.

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