Operations and performance

How banking sector is deteriorated in FY 2017 -18 and how first time after 1993-94 PSB sector registered
losses.

As regulator RBI has taken several steps in order to revive the banking system

 Asset quality review (AQRs)

 New framework for resolution of stressed assets under IBC
 Recapitalization of the PSBs

3) Financial Performance

The financial performance of banks during 2017-18 was burdened by deteriorating asset quality and
treasury losses which impacted non-interest earnings

4) Soundness Indicators

Soundness indicators are barometers of the financial health of the banking sector. During 2017-18 and
2018-19 (up to September 2018), capital adequacy remained above regulatory requirements in spite of
the NPA ratio increasing. Leverage and liquidity coverage ratios (LCR) also witnessed improvement

5) Sectoral Distribution to Bank Credit

During 2017- 18, bank credit to agriculture decelerated, reflecting risk aversion and debt waivers by
various governments, which may have disincentivized lending to the sector.

Increase in credit to NBFC and robust growth of personal loans were also seen in 2017-18

6) Operation of SCBs in th capital market

No issue for PSB this year

Private placements of bonds remained the major long-term source of funding for banks. Also, amount
raised by PVBs was higher than those of PSBs.

Stocks: Nifty bank index outperformed Nifty 50 and Nifty private bank index yielded better returns than
the Nifty PSU bank index

7) Ownership pattern in scheduled commercial banks

During 17-18 govt. ownership in 16 out of 21 PSBs increased due to capital infusion. At the same time
govt. share declined in 5 PSBs as they raised resources through qualified institutional placements (QIPs)
and other capital market Instruments.