Banks may see bad loans double despite signs of an improvement in the economic impact of the COVID-19 pandemic, a report from RBI said.
Banks may see bad loans double despite signs of an improvement in the economic impact of the COVID-19 pandemic, a report from the Reserve Bank of India's Financial Stability and Development Council said on Monday. The gross non-performing assets of banks may increase from 7.5 per cent in September 2020 to 14.8 per cent under a severe stress scenario. Even under a baseline scenario it may rise to 13.5 per cent by September 2021, the council said.
Meanwhile, industry body Confederation of Indian Industries (CII), in its Pre-Budget Memorandum 2021-22 has recommended the government to create multiple bad banks by allowing Alternate Investment Funds (AIFs) to buy bad loans.
"The financial sector, particularly the lending side, is a critical artery of the economy and its robust operations are a key pillar in India's journey to a $5 trillion economy. It is worthwhile to consider whether it is a time to review are financial structure in a manner that is comprehensive and can support the economic needs of India's real sector," CII said in its Pre-Budget Memorandum 2021-22.