The Reserve Bank of India (RBI) has raised concerns over deteriorating
banking sector of the country as macroeconomic conditions are still
unfavorable.

In its half-yearly Financial Stability Report, the RBI said that Gross
non-performing assets (NPAs) as a percentage of all scheduled commercial
banks' total assets will jump from 3.4 per cent in March to estimated
3.8 per cent.

The central bank's macro stress tests also indicated that the ration
could worsen to 4.4 per cent under tough conditions by the end of fiscal
2014, or conversely improves to 3.5 per cent if the conditions improve.

The report also revealed that construction and agriculture sector would likely register the highest NPA ratios.

The RBI said in its recently released report, "Construction and
agriculture are expected to register the highest NPA ratios of around
4.7-4.8% by March 2014, followed by the iron and steel sector."

The country's gross domestic savings as a proportion to its gross
domestic product slipped from 36.8 per cent in 2007-08 to 30.8 per cent
in 2011-12.

It also took note of the country's rising vulnerability to the
unpredictable external markets, and the increase in the country's
overall external debt, which jumped $44.6 billion in 2012 to $390
billion this year.