Lok Sabha Question No. 2363 (UNSTARRED), answered on 2019-07-08
Subject: Maintenance of CAR by Banks
Ministry: FINANCE
Asked by: Rahul Ramesh Shewale, Bhartruhari Mahtab

## GOVERNMENT  OF INDIA MINISTRY  OF FINANCE DEPARTMENT  OF FINANCIAL SERVICES

## LOK SABHA

## UNSTARRED QUESTION NO. 2363

TO BE ANSWERED  ON THE 8 TH  JULY  2019/ ASHADHA  17, 1941 (SAKA)

## Maintenance of CAR  by Banks

2363.  SHRI  RAHUL  RAMESH  SHEWALE:

Will  the Minister  of FINANCE  be pleased to state:

- (a) whether   the  Public   and  Private   Sector   Banks   have  maintained   the  required   Capital   Adequacy   Ratio (CAR)  despite negative  effects of economic slowdown,  depreciation  of rupee,  inflationary pressures   and  high domestic  interest  rates on their  asset quality, profitability and capital  during  the current  year,  if so, the details thereof;
- (b) whether  the Reserve  Bank of India is of the view  that  the gross NPAs  of the said banks  have reached  to an alarming  level  due to no improvement  in macro-economic  situation  despite several  measures  taken  by  the Government,  if so, the details  thereof;  and
- (c) whether  the Credit  Rating  Agencies  have downgraded  the rating  of Indian  Banking  Sector  due to their stressed asset quality, if so, the details  thereof  along  with  the corrective  steps taken  by  the Government  in this regard?

## ANSWER

SHRI BHARTRUHARI MAHTAB:

## THE MINISTER  OF STATE  FOR  FINANCE (SHRI ANURAG  SINGH THAKUR)

- (a) and (b): As per RBI guidelines,  banks  are required  to maintain  a minimum  Capital  to Risk-weighted Assets (CRAR)  of 9% on an ongoing  basis. As on 31.3.2019,  all Public  Sector  Banks (PSBs) and Private  Sector  Banks meet  this  minimum   CRAR   requirement. As  per  RBI's  Financial   Stability Report   (FSR)  of  June 2019,  as  on 31.3.2019,  the CRAR,  for Scheduled  Commercial Banks (which  include  both  PSBs and Private  Sector  Banks)  and PSBs was 14.3% and 12.2% respectively.

As per FSR of June 2019, growth  of gross non-performing  assets (NPAs)  has decelerated  across all bank  groups, including  PSBs, and further,  due to the increased  pace of recognition  of NPAs,  NPAs  in the banking  system peaked in March 2018 and have since declined  to 9.3% in March 2019,   signalling  a   turnaround  in the NPA cycle.  In addition,  under  the baseline  scenario  of macro-stress  tests for credit,  FSR has projected  further  decrease in the gross NPA  ratio  of all Scheduled  Commercial Banks to 9.0% by March 2020, driven  by  a decline  in the gross NPA  ratios  of PSBs' from  12.6% to 12.0% over the same period.

- (c): As per the Securities  and Exchange  Board of India (Credit  Rating  Agencies)  Regulations, 1999, credit  rating agencies rate securities  offered by  way  of public  or rights  issue. Accordingly, credit  rating  agencies  rate  securities and not industry.  However,  recent  credit  rating  agency  reports  have highlighted  several  positive  aspects regarding the Indian  Banking  sector  including inter-alia , the following:
- (ii)  ICRA,  an associate  of the leading  international credit  rating  agency  Moody's  Investor  Service,  in its report titled  'ICRA  Looks  at Sectoral  Development  Prospects  for NDA  2.0',  has stated:  'The GNPAs  and NNPAs of PSBs is expected  to decline  to 8.1-8.4% and 3.5-3.6% by  March  2020.'
- (i) CRISIL,  a subsidiary  of the leading  international credit  rating  agency  S&P  Global,  in its article  titled  'Bank NPAs to  shrink   350  bps  to  ~8%   by   March 2020',   has  stated:   'Asset  quality   of  banks   should   witness   a decisive  turnaround  this fiscal with  gross non-performing  assets (NPAs)  reducing  by  350 basis points  (bps) over two  years  to ~8%  by  March  2020 compared  with  a peak  of ~11.5%  in March  2018 and 9.3% in March 2019...  PSBs should  see their  gross NPAs  climb  down  over 400 bps to ~10.6%  by  March 2020.'