India’s financial system remains stable, said a report of the Reserve Bank of India (RBI), which added that the overall risks to the banking sector remained elevated due to asset quality concerns.

RBI’s Financial Stability Report said that credit growth of scheduled commercial banks (SCBs) showed an improvement between March and September 2017, while public sector banks (PSBs) continued to lag behind their private sector peers.

The gross non-performing advances (GNPA) ratio and the stressed advances ratio of the banking sector increased between March 2017 and September 2017.

“Stress test suggests that in the baseline scenario, GNPAs of the banking sector may rise from 10.2 percent of gross advances in September 2017 to 10.8 percent in March 2018 and further to 11.1 percent by September 2018.

“SCBs’ return on assets (RoA) remained unchanged at 0.4 percent between March and September 2017 while PSBs have continued to record negative profitability ratios.”

It said that the share of large borrowers both in total SCBs’ loans as well as GNPAs declined between March and September 2017.

“From the perspective of larger financial system, SCBs continued to be the dominant players accounting for nearly 47 percent of the bilateral exposure followed by asset management companies managing mutual funds (AMC-MFs), non-banking financial companies (NBFCs), insurance companies, housing finance companies (HFCs) and all-India financial institutions (AIFIs).