Due to the Covid pandemic, the economy is in a multi-speed recovery and yet struggling to grab the pace of gaining maximum numbers. The bad loans or gross non-performing assets (NPAs) of the banking sector are anticipated to shoot up to 13.5 percent of advances by September 2021. Under the baseline scenario, the Financial Stability Report of the Reserve Bank of India stated that the macroeconomic environment has worsened into critical stress with a ratio of 14.8 percent. He has also dropped a crucial statement regarding the hike in NPA that a multi-speed recovery is struggling to reach the good numbers and reinforce positive news on vaccine development. Moreover, the second wave of infections has widely spread heightened uncertainty to stall the fragile recovery.
With the bank groups, the NPA ratio of PSU banks has 9.7 percent in September 2020 has majorly increased to 16.2 percent in September 2021 under the baseline scenario. Banks have allegedly managed to drop their NPA to 7.5 percent of advances in September 2020 fro, 8.2 percent in March 2020. Banks have written off-record Rs 2,37,876 crore in fiscal 2019-20 allowing the banks to show lower NPAs.
The RBI, however, has warned the modest NPA ratio of 75 percent at the end of September 2020. The RBI had also announced a moratorium on loan repayments till August 2020 and have saddened with unpaid dues. Banks have got a sort of relief including a 30-day extension in NPA classification from the RBI in terms of stressed loans amid the mounting fears over rising NPA.
The uncertainty induced by Covid and real economic impact has also risen the quality of the banking system and it may deteriorate sharply. The gross NPA has declined to Rs. 8,99,803 crore in March 2020.
