Govt must heed Urjit Patel's warning on NPAs, come up with policy response

The former RBI governor has served a warning on the intractable problem of bad loans

The Indian economy contracted by about 24 per cent in the first quarter of the current fiscal year and output is likely to shrink even in the second quarter. The overall decline in output and continued weakness in the real sector would increase difficulties for the financial sector. It is possible that non-performing assets (NPAs) in the banking system would be higher than what is being projected. The latest Financial Stability Report of the Reserve Bank of India (RBI) projected an increase in the gross NPA ratio to 12.5 per cent under the baseline scenario, and it can go up