RBI has shown serious concern over weakening corporate performance effecting debt servicing capabilities and thereby threatening financial performance of banks. This fact was disclosed in recently released financial stability report on behalf of financial stability development council (FSDC) .This report revealed that five core sectors of economy i.e. mining, iron & steel, textile, infrastructure & aviation accounted for 24.2% of advances from Indian banks but 53% of stressed debts .
The gross Non-performing assets (GNPA) of scheduled commercial banks as percentage of loans rose to 5.1% n September 2015 from 4.6% in March 15. The overall stressed loans which includes restructured loans also went up to 11.3% in September 2015 as against 11.1% in March 15. Such stressed assets of public sector banks went up to 14.5% of this total loans.
This report further revealed that GNPA would rise to 5.4% in September 2016 and if the economy further worsens , such loans could deteriorate further and may go up to 6.9% by march 17. Key factors contributing to this situation are:
Deteriorating asset quality
The facts mentioned in this financial stability Report Dec. 2015 will have to be kept in view by the finance ministry in budget making exercise for 2016-17 so that situation could improve and banking sector could be saved from further deterioration of stressed assets.