The Reserve Bank of India has warned that bad loans in banks could rise to a 20-year high as a result of the economic crisis triggered by the Covid-19 pandemic. According to the central bank, bad loans could rise from 8.5% in March 2020 to 12.5% by March 2021 under its baseline scenario, and 14.7% if the stress is severe. “The financial system in India remains sound. Nonetheless, in the current environment, the need for financial intermediaries to proactively augment capital and improve their resilience has acquired top priority. In the evolving milieu, while risk management has to be prudent, extreme risk aversion would have adverse outcomes for all,” RBI governor Shaktikanta Das said in a foreword to the report.