Bad debts to rise due to Covid, but banks adequately capitalised: RBI FSR

The ferocity of the second wave of Covid-19 has dented economic activity, but monetary, regulatory and fiscal policy measures have helped stabilise markets, and maintain financial stability, says FSR

The Reserve Bank of India (RBI) expects bad debts in the Indian banking system to rise steeply by the end of this fiscal year, but at a rate not as alarmingly high as it was anticipated a year ago, and banks this time are better fortified with capital.

Under the RBI’s macro stress tests, the gross non-performing asset (GNPA) ratio of the banking system may increase from 7.48 per cent in March 2021 to 9.80 per cent by March 2022 under the “baseline” scenario, and to 11.22 per cent under a “severe stress” scenario, but banks have sufficient capital to take