Mumbai, Jun 26 (IANS): The gross non-performing assets (GNPAs), or bad loans, ratio in the Indian banking system is likely to rise from 11.6 per cent in March 2018 to 12.2 per cent by the end of March next year, the Reserve Bank of India said on Tuesday.

Referring to the 11 state-owned banks under prompt corrective action framework (PCA) on account of NPAs, the RBI, in its Financial Stability Report (FSR), also said these may see a worsening of their GNPA ratio from 21 per cent in March 2018 to 22.3 per cent by the end of the ongoing 2018-19 fiscal.

"Macro-stress tests indicate that under the baseline scenario of current macroeconomic outlook, SCBs' (scheduled commercial banks) GNPA ratio may rise from 11.6 per cent in March 2018 to 12.2 per cent by March 2019," it said.

Of the 11 banks, six are likely to experience capital shortfall relative to the required minimum risk-weighted assets ratio (CRAR) of 9 per cent, the central bank said.

The 11 banks under PCA framework on account of their high bad loans are IDBI Bank, UCO Bank, Central Bank of India, Bank of India, Indian Overseas Bank, Dena Bank, Oriental Bank of Commerce, Bank of Maharashtra, United Bank of India, Corporation Bank and Allahabad Bank.

Though the overall system level CRAR may come down from 13.5 per cent to 12.8 per cent during the period in review, the FSR said profitability of all commercial banks had declined partly reflecting increased provisioning on account of bad loans.

"The stress in the banking sector continues as GNPA ratio rises further," the report said

"Spillover risk from advanced financial markets to emerging markets has increased," it added.

On the domestic situation, the RBI said economic growth is firming up.

"However, conditions that buttressed fiscal consolidation, moderation in inflation and a benign current account deficit over the last few years, are changing, thereby warranting caution," the report said.