State-run banks and foreign banks were hit by bad loans as their non-performing assets rose, says the Reserve Bank of India (RBI).
Led by state-run banks and foreign lenders, "the asset quality of the banking system deteriorated significantly in FY12 after a period of
sustained improvement," says the report on 'Trend and Progress of Banking in 2011-12' released on the weekend.
Non-performing assets (NPAs) of public sector banks rose to Rs. 1,11,664 crore in 2012 from R52,807 crore in 2003, it said. NPAs of State Bank of India (SBI) and its associates in 2012 (as of March 31) were at R45,695 crore from Rs. 16,958 crore in 2003, while that of nationalised banks' were at Rs. 65,969 crore versus Rs. 35,849 crore.
Though the report states that there is no systemic risk to the banking system as fundamentals are robust, the RBI says the banking system is weaker due to rising bad loans as growth has fallen below potential and firms are reeling under obstacles to project clearances.
The fall in asset quality was more visible in public sector banks, the report added.