RBI reports point to mounting problems at PSBs

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Two RBI reports on trend and policy in 2014-15 and financial stability (Decemebr 2015) has drawn attention to the the mounting problems of banks, particularly PSBs, in the wake of contraction of credit expansion into single digits.

They have pointed out that while profits increased, it was because of a decline in growth of operating expenses rather than a rise in growth of income.Third, the return on assets (RoA) showed no improvement and, in particular, the profitability of public sector banks (PSB) declined significantly.Fourth, asset quality declined, particularly for PSBs, and there was a rise in the volume and proportion of stressed assets.

In a nutshell, the report points to a worrisome situation, albeit in a global context. And the only consolations are that in the global context, India does not appear to be an exceptional under-performer.

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