This macro approach to financial monitoring has enabled policy makers to fine-tune their regulatory stance in consonance with the changing market and institutional dynamics so as to balance growth and stability concerns.
For instance, despite the gradual tightening of prudential norms, the ratio of non-performing loans (NPL) to total loans, which was at a high of 15.7 per cent for scheduled commercial banks (SCBs) at end-March 1997, has declined by more than two thirds to 5.2 per cent at end-March 2005.