A parliamentary panel has asked the government to waive “any early euphoria” over the reduction of banks’ non-performing assets (NPAs), saying that due to a “delay effect” of the Coronavirus pandemic, there is an increase of bad loans could be .
The Standing Committee on Finance noted in its report submitted to parliament today that while the banking system appears to have weathered the pandemic shock well regarding NPAs, “(the Committee) would like to warn of any early euphoria at this point, as there may still be some slowdown in the banking sector pandemic”.
It further said it is necessary to absorb excess liquidity injected as part of the pandemic response to stimulate the economy as there may be a possibility of an increase in NPAs.
The panel considered that caution is still warranted and that the measures taken by the government to reduce NPAs and drive recovery should continue with the same vigor.
The committee has been informed that, contrary to projections from RBI’s Financial Stability Report in which the gross NPA ratio of commercial banks increases from 7.48 percent in March 2021 to 9.8 percent in March 2022, the gross NPA numbers for public sector banks fell from 9.11 percent on March 31, 2021 to 7.9 percent at the end of December 2021.