Bank NPAs may go beyond 8% by September 2022, says RBI report

 Going forward, as the economy recovers and credit demand rises, banks will need to ensure the availability of sufficient capital to support credit growth

Bad loans of commercial banks in India may rise to between 8.1 and 9.5 per cent under varying degrees of stress by September 2022 from 6.9 per cent in September 2021.

Yet, banks are generally well placed to weather credit-related shocks with sufficient capital, both at the aggregate and individual levels. This is possible even under stress, according to the Financial Stability Report (FSR).

FSR, the Reserve Bank of India’s (RBI’s) bi-annual report, said though banks are in better shape, urban cooperative banks (UCBs) and finance companies present a more varied picture.

Going forward, as the economy recovers and credit demand rises, banks will need to ensure the availability of sufficient capital to support credit growth.

Non-banking finance companies (NBFCs) and UCBs will have to be mindful of frailties on the liquidity front and ensure robust asset-liability management, apart from improving the quality of their credit portfolios.

Considering the significant share of funding absorbed by NBFCs at the system level, continued attention to their financial health is warranted in the interest of financial stability.

Gross non-performing assets (gross NPAs) of commercial banks fell from 7.5 per cent in March 2021 to 6.9 per cent at the end-September 2021.