The RBI on Tuesday released the annual report of the country's banking system (Trend and Progress of Banking in India 2019-20). The report said that the level of stuck loans (NPA) in Indian banks has come down to 7.5 percent in the quarter ended September 2020, but this is not the case. Fearing a far-reaching impact on Indian banks, especially public sector banks and NBFCs, the report said that the pandemic would prove to have a negative impact on banks' health.
he report also revealed that 40% of the borrowers took advantage of the moratorium (six months relief in repayment of loans) given by the banks. Its impact on the banking sector may be visible later. According to the report, the actual situation is not yet visible on the accounts of banks. The impact of Covid is not yet visible on the NPA figures.
The study of the data given by some banks suggests that due to Covid, the gross NPAs of banks (ratio of total advances to debt ratio) can increase from 0.10% to 0.66%. However, it is certain that their asset quality will decline and revenue will also be adversely affected in the future. This will be known only if the moratorium is properly assessed and the ban on taking the stranded loan case under the Insolvency Act is lifted.
Due to income and profitability being affected, the public sector banks will again need huge help from the government. During the current financial year, 20 thousand crores have been given to them by the government.
They will also need to raise more from the market. RBI said, Small Finance Bank, Payment Bank, Co-operative Bank, NBFCs (Non-Banking Financial Companies) will all see the impact of Covid. Many changes will be seen in the economy and banking system and banks should be ready to face them.