Indian banks’ bad loans may rise significantly: Financial stability report

The Reserve Bank of India’s (RBI’s) Financial Stability Report (FSR) of December 2020 has stated that banks’ gross non-performing assets (GNPAs) may rise sharply to 13.5 per cent by September 2021, and escalate to a 23-year high of 14.8 per cent, nearly double the 7.5 per cent in the same period of 2019-20, under the severe stress scenario.

With a better appraisal of the pandemic’s impact on economic conditions, it is assessed that the worst is behind us, though the recovery path remains uncertain. And banks will have to brace for a rollback of regulatory forbearance that was announced in the wake of Covid-19, and enhance their capital positions, the RBI said.

The FSR, released on Monday, gave a caveat: “Considering the uncertainty regarding the unfolding economic outlook, and the extent to which regulatory dispensation under restructuring is utilised, the projected ratios are susceptible to change in a nonlinear fashion”.