A Parliamentary committee has cautioned the government against getting excited about the reduction in non-performing assets (NPAs) or bad loans in the banking sector.
The committee has said that some effect of the Kovid-19 epidemic will be visible later, due to which bad debt may increase.
A committee of Parliament has cautioned the government to get excited about the reduction in non-performing assets (NPA) or bad loans in the banking sector.
The committee has said that some effect of the Kovid-19 epidemic will be visible later, due to which bad debt may increase. Actually, the figures were released on the last days on the decline in NPAs.
The banking system coped with the shock of the pandemic
The Parliamentary Standing Committee’s report tabled in Parliament on Tuesday said that as far as NPAs are concerned, the banking system has coped well with the shock of the pandemic.
The Committee was informed that contrary to the estimates of the Financial Stability Report of the Reserve Bank, the Gross NPA Ratio of commercial banks increased to 9.8 per cent in March 2022 from 7.48 per cent in March 2021.
The effect of the epidemic is still in the ‘pipeline’
The gross NPAs of public sector banks were 9.11 per cent as on March 31, 2021, which declined to 7.9 per cent at the end of December, 2021. “The Committee cautions against getting excited about the reduction in NPAs too soon,” the report said.
Perhaps some impact of the pandemic is still in the ‘pipeline’ for the banking sector. The report says that the excess cash that was injected into the system during the pandemic needs to be ‘recovered’ as there could be a possibility of a rise in NPAs.
