MUMBAI: According to the Reserve Bank of India (RBI), the country's superior macro-view has been supported by the financial system's resilience at a time when storm clouds are gathering over the global economy. According to the RBI's annual report on banking trends and progress, the banking system is resilient, allowing it to grow its balance sheet at a healthy rate on a broad-based increase in credit. According to the central bank, customers will benefit from its rate hikes, which will encourage deposit growth to meet demand. According to the RBI, banks' consolidated balance sheets experienced double-digit growth for the first time in seven years.
The return on equity and asset profitability of banks, as measured by the central bank, has increased to levels not seen since 2014–15.
Meanwhile, banks' net interest margin stands at 2. The fact that 9% fell below the threshold suggests that banks are taking on more risks.
The Reserve Bank of India (RBI) has instructed lenders to remain ready to capitalize on emerging opportunities despite the strong state of the Indian financial system. It has asked them to concentrate on sustainable, stable, appropriate business models, the adoption of new technology, consumer protection, and financial inclusion.
Bank accounts with loans exceeding Rs 5 crore saw their average loan size decrease to 47. 8% in FY22 from 48. 4% in FY21.
The RBI stated, "The GNPA (gross non-performing asset) ratio of SCBs (scheduled commercial banks) has been declining sequentially from its peak in 2017-18 to reach 5% in September 2022." The write-off of loans by public sector banks and the upgrading of loans by private banks accounted for the majority of the decrease. The report stated, "The banking sector may face new challenges as a result of the uncertainties that characterize the fast-changing macroeconomic scenario amid formidable global headwinds in 2022-23." Asset quality could be affected if downside risks materialize.