Five banking trends for the new year

This could be a year of higher NPAs, more recovery, relatively stronger bank balance sheets, low credit growth and better-managed cooperative banks

No prizes for guessing the dominant trend in Indian banking in 2020: The pile of bad loans will rise. The Reserve Bank of India’s (RBI’s) latest Financial Stability Report (FSR), a biannual health check of the banking system, says banks’ gross non-performing assets (NPAs) may rise from 9.3 per cent of total loans in September 2019 to 9.9 per cent by September 2020.

The regulator has given three reasons for this: Changes in the macroeconomic scenario, marginal rise in fresh slippages and the so-called denominator effect. The third one is simple arithmetic — as the credit portfolio of the banks