Banks' asset quality 'may get dented' as special schemes end: RBI report

Credit growth muted as pandemic risk to economy remains, says central bank in annual analysis.

The Indian financial system’s asset quality improved despite the pandemic, but it could be due to special dispensations by the regulator, and banks would likely see increased stress on their books once the schemes expire.

According to the annual trend and progress report of the Reserve Bank of India (RBI) released on Tuesday, the data available for this financial year so far indicate that banks’ bad debts have moderated while provision coverage ratios (PCRs), capital buffers as well as profitability indicators have improved relative to pre-pandemic levels.

“A closer look at granular data, however, reveals a more nuanced picture. Credit