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Mumbai , Aug 27

A REVIEW of the country's macro prudential indicators (MPIs) for the half-year ended March 2003 reveals that the degree of credit concentration for the banking system as a whole (in terms of credit extended to top 20 corporates as a percentage of total credit) has declined to 30 per cent as at end-March 2003 as against 33.4 per cent as at end March 2002.

The Reserve Bank of India introduced MPIs during the mid-term review of the Monetary and Credit Policy of October 2000, to undertake a half yearly financial stability review to monitor the soundness of the financial sector.

MPIs comprise both aggregated micro-prudential indicators of the health of individual financial institutions and macroeconomic variables associated with financial system soundness. As per the data revealed by MPIs for the half-year ended March 2003, the recent declining trend in the credit utilisation ratio has been reversed.

MPIs also reveal that for the first time ever, the ratio of gross non-performing loans to gross advances of the banking system declined below 10 per cent and the ratio of net non-performing loans to net advances dipped below 5 per cent.

Gross non-performing loans declined by 1.6 per cent and due to high provisioning, net non-performing loans declined by 9.8 per cent.

The combined CRAR of the banking system increased to 12.8 per cent as on end March 2003 from 12 per cent as on end March 2002. Investments in SLR securities exhibited high growth.

Return on equity at over 18 per cent turned out to be the highest in the last six years, while return on assets stood at over one per cent for the system as a whole.

Profits from treasury operations represented one of the key sources of income for the banking system, accounting for almost one-third of total operating profits. The banking systems short-term assets were in excess of short-term liabilities, with asset to liability ratio at 107.5 per cent, according to RBI.

During the MPIs review for half-year ended March 2003, top five banks accounted for almost 43 per cent of the assets of the banking system. Growth in regulatory capital outstripped the growth in risk-weighted assets.

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