RBI Deputy Governor HR Khan informed that the gross non-performing assets of banks rose 31.8 per cent, while restructured standard advances expanded 40 per cent in 2012-13.
Speaking at an event in Thiruvananthapuram, Khan attributed the rise in the NPAs to uncertain macroeconomic environment, underlying issues in credit assessment and bad loan management by banks.
But he pointed out that the situation improved towards the end of the financial year. The fourth quarter has recorded an improvement in asset quality, though it is too early to state with certainty that the trend of deteriorating asset quality has reversed, Khan said.
The resilience of the banking system and transparency in the accounting of asset quality would improve following the implementation of the recommendations of a working group on the guidelines to restructure loans.
Khan advised banks to trim bulk deposits, which is considered as a volatile liability and also improve the credit appraisal and monitoring mechanism.
Lenders should also evaluate the un-hedged foreign exchange exposure risks of customers and take these into account while pricing credit.
He stressed on the need to improve risk management, early warning systems and the information-sharing mechanism, as well as review asset liability management policies.
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