Why is it in the news?
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RBI released its half yearly financial stability report on Thursday 27th June.
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As per the report, there is decline in NPAs while credit growth is picking up.
More in the news
Findings of the report:
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Gross non-performing assets in the banking system have declined for the second consecutive half year.
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Gross NPA ratio declined to 9.3% as on March 2019. It was 10.8% in September 2018 and 11.5% in March 2018.
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Following capital infusion by the government in public sector banks, the overall capital adequacy ratio of commercial banks improved from 13.7% in September 2018 to 14.3% in March 2019.
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The number of banks having more than 20% gross NPAs coming down in March 2019.
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Credit growth of public sector banks were at 9.6% while private lendsers continue to robust growth of 21%.
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Overall credit growth marginally improved to 13.2% in March 2019 from 13.1% in September 2018.
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Macroeconomic Front:(1) On the macroeconomic front, the private consumption turned weak.(2) A widening current account deficit have exerted pressure on the fiscal front.
Implication of CAR:
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When this ratio is high, it indicates that a financial institution has an adequate amount of capital to deal with unexpected losses.
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When the ratio is low, an entity is at a higher risk of failure, and so may be required by the regulatory authorities to add more capital.
Source
The Hindu.