Bank stocks had been in concentrate today falling as a lot as 1 per cent right after the Reserve Bank of India (RBI) released a report on Trend and Progress of Banking in India in 2019-20. The report talked about the influence of COVID-19 on banking and non-banking sectors. Bank of Baroda, Indian Bank, Punjab National Bank, Canara Bank and UCO Bank had been the major losers on PSU Bank index. An analyst at Geojit Financial Services mentioned that the most current RBI report warns of the sharp deterioration in the asset excellent of banks post-moratorium. “This is likely to impact banking stocks, particularly the PSU bank stocks which have been rallying recently,” mentioned V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
RBI undertook various measures to mitigate the effects of COVID-19 pandemic. Its regulatory ambit was reinforced by legislative amendments, providing it higher powers more than co-operative banks, non-banking monetary firms (NBFCs), and housing finance firms (HFCs). The gross non-performing assets (GNPA) ratio of scheduled industrial banks (SCBs) declined from 9.1 per cent in Mar’19 to 8.2 per cent in Mar’20 and 7.5 per cent in Sep’20.
Analysts at Motilal Oswal Financial Services stay watchful on the asset excellent of banks as they recognize NPLs from the moratorium/overdue loans. The brokerage firm mentioned that the all round trends have fared much better than earlier expectations, aided by a sharp improvement in collection efficiency. “Though slippages are likely to increase over 2HFY21, particularly after the SC order ended the moratorium on 31 Aug’20, many banks have already provided for this and carry an additional provisions buffer, which should limit the impact on profitability, even as credit cost remains elevated,” it added.
Moreover, the capital to threat-weighted assets (CRAR) ratio of SCBs strengthened from 14.3 per cent at finish-March 2019 to 14.7 per cent at finish-March 2020 and 15.8 per cent in September 2020, aided by recapitalisation of public sector banks (PSBs) and capital raising from the industry by each public and private sector banks. The central bank undertook various measures to mitigate the effects of the COVID-19 pandemic. Its regulatory ambit was reinforced by legislative amendments, providing it higher powers more than co-operative banks, non-banking monetary firms (NBFCs), and housing finance firms (HFCs).
The report also stated that the consolidated balance sheet of NBFCs decelerated in 2019-20 due to close to stagnant development in loans and advances, though some improvement was visible in the initial half of the monetary year 2020-21. “Notwithstanding a marginal deterioration in asset quality, the NBFC sector remains resilient with strong capital buffers,” it mentioned.