BS Banking Annual: Worst may be coming as recovery path remains uncertain

The FSR has warned that while easy money is intended to support growth, it can encourage leverage, inflate asset prices and endanger financial stability

The optimism shown by bankers in public statements that there is buoyancy in the economy may be misplaced. The Reserve Bank of India’s (RBI’s) Financial Stability Report (FSR) of December 2020 has stated that banks’ gross non-performing assets (GNPAs) may rise sharply to 13.5 per cent by September 2021, and escalate to 14.8 per cent, nearly double the 7.5 per cent in the same period of 2019-20, under the severe stress scenario.

And despite this, on the day the FSR was released, the Sensex hit a life-high of 49,000 points! The irony is that the FSR mentions the growing disconnect