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Gross NPAs of banks may increase to 9.8% of total assets by March 2022, says RBI report

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Gross NPAs of banks may increase to 9.8% of total assets by March 2022, says RBI report

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RBI's Financial Stability Report states that gross non-performing assets (GNPAs) of banks may rise to 9.8 percent by March 2022 under a baseline scenario, from 7.48 percent in March 2021

Reserve Bank of India (RBI) released its Financial Stability Report (FSR) on July 1, according to which gross non-performing assets (GNPAs) of banks could rise to 9.8 percent by March 2022 under a baseline scenario, from 7.48 percent in March 2021.
Under the severe stress scenario, GNPAs may increase to 11.22 percent, according to macro stress tests, the RBI report said.
The FSR published in January this year had said that banks' GNPAs may rise to 13.5 percent by September 2021. The latest FSR, however, said that banks have sufficient capital, both at the aggregate and individual level -- even under stress.
Public sector banks' (PSBs) GNPA ratio of 9.54 percent in March 2021 edging up to 12.52 percent by March 2022 under the baseline scenario is an improvement over earlier expectations and indicative of pandemic-proofing by regulatory support, it added.
"Going forward, as banks respond to credit demand in a recovering economy, they will need to reinforce their capital and liquidity positions to fortify themselves against potential balance sheet stress," the report stated.
In the foreword to the report, RBI governor Shaktikanta Das said, "The dent on balance sheets and performance of financial institutions in India has been much less than what was projected earlier, although a clearer picture will emerge as the effects of regulatory reliefs fully work their way through. Yet, capital and liquidity buffers are reasonably resilient to withstand future shocks."
He highlighted new risks that have emerged, including potential future waves of the pandemic, international commodity prices and inflationary pressures, global spillovers amid high uncertainty, and rising incidence of data breaches and cyber attacks.
The 23rd issue of the FSR report stated that policy support, benign financial conditions and the gathering momentum of COVID-19 vaccination are nurturing an uneven global recovery.
"Policy support has helped in shoring up financial positions of banks, containing non-performing loans and maintaining solvency and liquidity globally," the central bank’s report read.
Moreover, the second COVID-19 wave has dented economic activity, but monetary, regulatory, and fiscal policy measures helped curtail the solvency risk of financial entities, stabilise markets and maintain financial stability.
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