Mumbai, Nov 22 (IANS): The Reserve Bank of India (RBI) Thursday voiced concern over the rising non-performing assets or bad loans of banks and said it would focus on monitoring their asset quality.

In a report on Trend and Progress of Banking in India - 2012-13, the RBI said weakening domestic macroeconomic conditions combined with the continuing subdued global growth posed challenges to the banking sector during 2012-13.

“However, the comfortable capital base continues to lend resilience to the Indian banking sector,” it said.

The RBI said there was a need for an effective reduction in the non-performing assets (NPAs) and improvements in the loan recovery process.

According to the RBI, there is also a need to “stimulate and foster competition in the banking sector and liberalise licensing policies”.

The RBI said growth of the Indian banking sector slowed down for the second consecutive year in 2012-13 amid slowdown in the domestic economy and tepid global recovery.