Gross Non Performing Asset (GNPA) Ratio of the banks is expected to rise to 13.5% under a baseline scenario by September this year. The RBI has warned that in the worst case it may almost double to 14.8%. The ratio of gross NPA was 7.5 in September 2020.
Reserve Bank of India released its Financial Stability Report (FBR) 2021 on Monday. The bi-annual publication reflects the collective assessment of the sub-committee of Financial Stability and Development Council. It also incorporates the first advance estimates of national income for 2020-21. The National Statistical Office has forecasted that the economy may contract further to 7.7% during this fiscal.
RBI in its previous report had projected GNPA to rise by March 2021. Covid-19 has been cited in the case of data not reflecting the true state of bad loan impairment of banks.
Governor of RBI, Shantikanta Das cautioned the banks about their NPA problem. Banks will be called to meet for the funding requirement of the economy after it faced hurdles owing to the pandemic. “Consequently, maintaining the health of the banking sector remains a policy priority and preservation of the stability of the financial system is an overarching goal,’’ Das added.
As far as bank groups are concerned the GNPA ratio of PSU's that was 9.7% in September 2020 might increase to 16.2% by September 2021 under the baseline scenario while the GNPA ratio of private banks is likely to increase from 4.6% to 7.9% and foreign banks from 2.5% to 5.4%.
The RBI also added that while the banking system's capital base may brave the stress due to Covid-19, some individual banks might need phased assistance of capital infusion.