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The
report noted the gross non-performing advances ratio of
commercial banks - a measure of stress in the sector - had
increased to 9.1 percent in September from 7.8 percent in March,
pushing the overall stressed assets ratio to 12.3 percent from
11.5 percent.
Stressed assets levels could increase further under baseline
case scenarios, especially at state-run lenders, but the overall
financial system remained stable after recent moves forcing
banks to account for the true extent of bad loans in their
balance sheets, the RBI said.
"While the domestic banking sector continues to face significant
levels of stress partly reflecting legacy issues, on balance,
enhanced transparency has helped to reinforce the stability of
India's financial system," Patel said in the foreword of the
report.
Patel also said domestic economic conditions remained "stable",
adding India had seen "significant moderation" in inflation,
although he also noted growth momentum "has slackened" recently.
The RBI Governor also endorsed India's shock move last month to
remove higher-value notes from circulation, saying it would
"impart far reaching changes," including in boosting digital
payments, while acknowledging "the short-term disruptions in
certain segments of the economy and public hardship."
The RBI this month unexpectedly kept interest rates unchanged,
saying the economic impact from the so-called demonetization
action would prove just transitory.
(Reporting by Rafael Nam; Editing by Biju Dwarakanath)
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