Net non-performing assets (NPA) ratio of banks declined to a multi-year low of 0.8% at the end of September 2023 and the country's domestic financial system remains resilient, the Reserve Bank of India (RBI) said today.

"The resilience of the non-banking financial companies (NBFCs) sector improved with CRAR at 27.6%, gross NPA ratio at 4.6% and return on assets (RoA) at 2.9%, respectively, in September 2023," the RBI's Financial Stability Report (FSR) stated.

The gross non-performing assets ratio of banks also declined to a multi-year low of 3.2%, it said.

The report reflects the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC) on risks to financial stability and the resilience of the Indian financial system.

It further said that the capital to risk-weighted assets ratio (CRAR) and the common equity tier 1 (CET1) ratio of scheduled commercial banks (SCBS) stood at 16.8% and 13.7%, respectively, in September 2023.

"Macro stress tests for credit risk reveal that scheduled commercial banks (SCBs) would be able to comply with minimum capital requirements, with the system-level CRAR in September 2024 projected at 14.8%, 13.5% and 12.2%, respectively, under baseline, medium and severe stress scenarios," the report said.

Referring to the present state of Indian economy, it said the domestic financial system remained resilient, supported by strong macroeconomic fundamentals, healthy balance sheets of financial institutions, moderating inflation, improving external sector position and continuing fiscal consolidation.

However, the global economy faces multiple challenges, including prospects of slowing growth, large public debt, increasing economic fragmentation, and prolonging geopolitical conflicts.