Come September, bad loans will zoom

The only way to save the financial system and the economy is the Reserve Bank relaxing banks' asset classification norms

The Reserve Bank of India’s (RBI’s) December 2019 Financial Stability Report, a biannual health check for the banking industry, had predicted the gross non-performing assets (NPAs) rising from 9.3 per cent in September 2019 to 9.9 per cent by September 2020. The contributing factors to the rise were a change in the macroeconomic scenario, a marginal increase in slippages and, of course, the denominator effect of declining credit growth. In the financial year 2020 that ended in March, bank credit growth has been 6.1 per cent, less than half of 2019's 13.3 per cent.

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