Supported by growth in businesses and gradual improvement in internal credit reviews, on balance credit risk have been well managed. The net NPLs to net loan ratio have declined in the last few years and fell to 1.8% by September 2006.
In recent years, the macroeconomic environment has been supportive of the growth of banking systems but the growing fiscal imbalance and the external imbalances have enhanced domestic demand pressures. While the vulnerabilities of banking system have been well managed, the shocks arising from external sources can be a cause of concern.