The Reserve Bank of India on Tuesday said that the gross non-performing advances ratio of banks is likely to worsen by the end of financial year 2018-’19, PTI reported.

“Macro-stress tests indicate that under the baseline scenario of current macroeconomic outlook, SCBs’ [scheduled commercial banks] GNPA ratio may rise from 11.6% in March 2018 to 12.2% by March 2019,” the central bank said in its Financial Stability Report.

The report said profitability of all commercial banks had declined, however, their credit growth had picked up during the financial year 2017-’18, despite sluggish deposit growth.

The RBI said the 11-state owned banks that are currently under prompt corrective action framework may see their GNPA ration increase from 21% in March 2018 to 22.3% at the end of the current financial year.

The 11 banks under RBI’s watchlist for their high bad loans are – Dena Bank, UCO Bank, IDBI Bank, Bank of Maharashtra, Corporation Bank, Bank of India, Central Bank of India, United Bank of India, Oriental Bank of Commerce, Indian Overseas Bank, and Allahabad Bank.

“The capital augmentation plan announced by the government will go a long way in addressing the potential capital shortfall, while also playing a catalytic role in credit growth at healthier banks,” RBI said. “In parallel, the Reserve Bank’s PCA framework, by preventing further capital erosion at weaker banks, is intended to help strengthen these banks to a point of resilience from where they can restart normal operations.”

The report further said the governance reform measures, if undertaken promptly, would improve the financial performance of the banking sector as well help reduce operational risks.