Apart from NPAs for the most part in the MSME sector, roughly banned investment from the private sector negatively impacting the growth for a corporate loan will be another big challenge that banks will have to anticipate to face in the coming months. Managing the non-performing assets will be another big challenge for the banking and financial sector in the new year as numerous companies, especially in the MSME sector, may not be able to hold out against the heat of the coronavirus pandemic which led to a historic decline of the economy in the first half of the ongoing fiscal.
Besides, dampening investment from the private sector focusing on the corporate loan growth will be one another challenge that banks will have to look into in the coming months. Despite having enough liquidity in the banking system, the demands from the corporate sector is reasonably very low and bankers hope that faster than anticipated recovery could bring in the upliftment in the spirit as far as India Inc is concerned.
Although the Indian economy saw a smooth recovery from 23.9 percent decline in the first quarter to 7.5 percent decline in the second quarter, it is yet to loft the sentiment of India Inc. as noticed in the past few years, private investment has been reasonably low while the spendings by the public has been doing the heavy lifting for the economy then trade or FDI. As far as the financial and banking sector is concerned, the breakout of the pandemic early in 2020 has largely shaped activities and operations during the major part of the year. Also it strives to allow relief to millions of borrowers who faced disturbance in their income due to the lockdown, banks under the guidance of RBI extended ban for six months.