Gross NPAs May Shoot Up To 14.8% By September, Says RBI

The Reserve Bank of India (RBI) said on Monday that Indian banks’ total gross non-performing assets (GNPAs) may rise to 14.8 per cent under a severe stress scenario by September 2021 compared with 7.5 per cent in the year-ago period. This highlights the need for proactive building up of adequate capital to withstand possible asset quality deterioration, RBI said in its Financial Stability Report (FSR).

“Macro stress tests incorporating the first advance estimates of gross domestic product (GDP) for 2020-21 released on January 7, 2021 indicate that the GNPA ratio of all SCBs may increase from 7.5 per cent in September 2020 to 13.5 per cent by September 2021 under the baseline scenario; the ratio may escalate to 14.8 per cent under a severe stress scenario,” the financial report said.

The central bank further stated that in the initial phase of the COVID-19 pandemic, policy actions were geared towards restoring normal functioning and mitigating stress. The focus is now being oriented towards supporting the recovery and preserving the solvency of businesses and households, the report said.

“Positive news on vaccine development has underpinned optimism on the outlook, though it is marred by the second wave of the virus including more virulent strains,” RBI said.

“Policy measures by the regulators and the government have ensured the smooth functioning of domestic markets and financial institutions; managing market volatility amidst rising spillovers has become challenging especially when the movements in certain segments of the financial markets are not in sync with developments in the real sector,” the report stated.