Capital crunch

Structural problems in banking system would affect recovery

The latest Financial Stability Report of the Reserve Bank of India (RBI) underscores the kind of damage the ongoing pandemic can cause to the Indian banking system. Overall gross non-performing assets (GNPAs) for the scheduled commercial banks declined from 9.3 per cent in September 2019 to 8.5 per cent in March 2020, but things could worsen significantly in the coming quarters. The stress tests conducted by the RBI showed that GNPAs could go up to 12.5 per cent by March 2021 under the baseline scenario, compared with 8.5 per cent in March 2020. However, if the macroeconomic outlook worsens further,