Mumbai, Aug. 22: The Reserve Bank of India today warned that if the challenges facing the infrastructure sector were not resolved, it could affect the asset quality of banks and pose a risk to financial stability.
Commercial banks, particularly the PSU lenders, have been witnessing a growth in non-performing assets (NPAs).
According to the RBI, the ratio of gross NPAs to gross advances had remained flat at around 2.5 per cent during 2008-11, but deteriorated significantly thereafter because of a slowdown in the economy and the emergence of sector-specific issues amid structural bottlenecks.
The gross NPA ratio rose to 3.92 per cent in June this year from 2.36 per cent in March 2011.
Moreover, stress tests by the central bank have shown that this ratio may rise to 4.4 per cent by March 2014 under severe pressure.
Restructured standard assets as a percentage of gross advances more than doubled to 6.1 per cent in June from 2.6 per cent in December 2010.
The RBI said sectors such as infrastructure, which have been facing problems such as stalled projects in the absence of environmental clearances or raw material linkages, are finding it hard to raise fresh equity given an already high net debt to equity ratio.
Therefore, if the issues are not sorted out quickly, it could directly lead to a spike in the bad loans, the apex bank indicated.
On fiscal deficit, which is estimated at 4.8 per cent of the gross domestic product (GDP) this year, the RBI said as the budget relied largely on revenue-led fiscal consolidation, its success would depend on the revival of investment climate and growth.
It said a lower growth rate might make it difficult to achieve the budgeted tax-GDP ratio of 10.9 per cent.
The RBI also expressed doubts regarding the Centre’s plan to mobilise Rs 14,000 crore through the divestment of its residual stakes in non-government companies.
It has, therefore, asked the government to explore the possibility of getting larger dividends from cash-rich public sector undertakings and push through stake sales in PSUs that are likely to attract investors and fetch good prices.