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13 availed by the RBI has delayed the recognition of bad loans. This is further evident from increase in restructured standard advances ratio of Scheduled Commercial Banks (SCBs) to 1.5% at end-September 2021 from 0.4% at end-September 2020. This poses the risk of delayed impact of distress on assets of banks if ongoing economic recovery fails to sustain. Although Indian SCBs don’t have much direct exposure to Russia and Ukraine, the ongoing crisis may lead to potential increase in delinquencies in trade credit linked to these two countries. NPAs on decline despite COVID-19 shock 11.2 9.1 8.2 7.3 6.9 6 3.7 2.8 2.4 2.2 0 3 6 9 12 FY18 FY19 FY20 FY21 FY22 (Sep-21) % GNPA NNPA Data as at end-March for FY18-FY21 Source: RBI The capital adequacy ratio, as denoted by Capital to Risk-weighted Asset Ratio, also improved during H1FY22 on account of higher retained earnings, recapitalisation of public sector banks by the government as well as fund raising by SCBs from the financial markets. Improvement in capital adequacy retio of SCBs 13.8 14.3 14.8 16.3 16.5 12 14 16 18 FY18 FY19 FY20 FY21 FY22 (Sep-21) % Data as at end-March for FY18-FY21 Source: Economic Survey 2021-22 The profitability ratios of SCBs continued to show improvement in FY22 owing to lower cost of deposits consequent to moderation in interest rates and contraction in total borrowings. The improvement in ROA points toward the improvement in the efficiency of asset utilisation by the SCBs. Stable income and lower provisions are likely to have driven rise in ROA. Dun & Bradstreet