Economic disruption caused by Covid-19 will push up non-performing assets (NPAs) in the banking sector. According to the latest Financial Stability Report of the Reserve Bank of India (RBI), under the baseline scenario, the gross NPA (GNPA) ratio can go up from 7.5 per cent in September 2020 to 13.5 per cent by September this year. The ratio would worsen if the macroeconomic conditions deteriorate. For the public sector banks (PSBs), it’s even worse. Their GNPA ratio can go up to 16.2 per cent by September 2021 under the baseline scenario, the report said. Clearly, weak bank balance sheets, particularly in PSBs, would affect economic revival. Given the state of the banking system, the government is reportedly considering the setting up of a bad bank to clean up bank balance sheets. RBI Governor Shaktikanta Das recently said the central bank was open to looking at any such proposal.
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First Published: Tue, January 19 2021. 23:05 IST