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Banks’ gross NPAs
Why is it in news?
- The Reserve Bank of India (RBI) indicated that gross non-performing assets (NPA) ratio of scheduled commercial banks (SCBs) could worsen to as high as 14.7% by the end of the current financial year, if the adverse economic impact of the COVID-19 pandemic was ‘very severe’.
- Gross NPAs in March 2020 stood at 8.5%.
About Capital to Risk-weighted Assets Ratio (CRAR):
- The CRAR of SCBs edged down to 14.8% in March, from 15% in September 2019.
- RBI has projected that the ratio could slide to “13.3% in March 2021 under the baseline scenario and to 11.8% under the very severe stress scenario.
About Bank credit:
- Bank credit which had considerably weakened during the first half of 2019-20, slid down further to 5.9% by March 2020 and remained muted up to early June 2020.
- This moderation was broad-based across all bank groups.
Future Economic Prospects:
- RBI said the near-term economic prospects appear severely impacted by lockdown induced disruptions.
- Disruption happened to both supply and demand side factors and it diminished consumer confidence and risk aversion.
Recovery:
- Full restoration in economic activity would be contingent upon the support for robust health infrastructure, recovery in demand conditions and fixing of supply dislocations.