Role of ARCs

NPAs in the Indian Financial system, though substantial, are still lower as a proportion of the GDP at current factor cost, as compared to other countries in the region. However, standard assets restructured by banks (including cases restructured through the CDR process) do not figure as NPAs. Assets that have been restructured continue to require significant amount of lender supervision. There is always a likelihood that some of these assets may turn into NPAs again. Net NPAs of Scheduled Commercial Banks as a percentage of Net Advances have steadily reduced from 8.1% in 1996-97 to 4.4% in 2002-03 and further to 1.1% in 2006-07 (Source: RBI Deputy Governor’s speech at FICCI-IBA Conference on “Global Banking: Paradigm Shift” on September 14, 2007). However, the increase in Gross NPAs is continuing.