RBI: Banks’ asset quality can deteriorate

The Reserve Bank of India’s Report on Trend and Progress of Banking in India in 2019-20 has cautioned that the asset quality of the banking system may deteriorate sharply, going forward, due to uncertainty induced by Covid-19 and its real economic impact. Gross non-performing assets ratio was at 7.5 per cent at end September 2020, which the report said veils the strong undercurrent of slippage.

“The accretion to NPAs as per the Reserve Bank’s Income Recognition and Asset Classification (IRAC) norms would have been higher in the absence of the asset quality standstill provided as a Covid-19 relief measure,” it further said. Significantly, the quantum of GNPAs of banks had declined for the second consecutive year to 8.2 per cent at end March 2020 from 9.1 per cent in end March 2019.

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