Reserve Bank of India (RBI) governor Shaktikanta Das met the heads of public and private sector banks on Monday to take stock of the progress in implementing the Covid19 resolution framework among other things.
The RBI governor also held discussions with the bankers on the outlook for stressed assets. This comes in the wake of the Supreme Court judgment which vacated its earlier interim order on standstill on the classification of assets. Analysts and rating agencies have estimated that the bad assets of banks will go up by as much as 1 per cent.
The gross non-performing assets (NPAs) of the banking sector is expected to rise to 9.6-9.7 per cent by March 31, 2021, and may even go up to 9.9 - 10.2 per cent by the end of next financial year, rating agency ICRA has estimated, as the impact of relief measures wanes off and stress is recognised after the apex court’s verdict vacating its earlier judgment of standstill on asset classification.
The headline pro forma gross NPAs and net NPAs reported by banks in Q3FY21 do not reflect the underlying stress on the asset quality of banks as the quantum of loans in the overdue categories have increased post the moratorium period and this will lead to a rise in non-performing assets of the banks.
Among other things, in the meeting with the bankers, the governor, along with deputy governors MK Jain and M Rajeshwar Rao discussed the liquidity scenario, monetary transmission, credit flow to the stressed sectors such as MSME and retail, and capital augmentation by banks.
The Governor in his remarks said the recent policy measures have been taken by the RBI to further support the ongoing recovery while preserving financial stability. He touched upon the importance of credit flows in sustaining the nascent economic recovery and advised the banks to remain watchful of the evolving situation and continue taking measures proactively for maintaining their business continuity, sharpening business strategies and raising adequate capital for strengthening balance sheets.
He also emphasised the need for banks to maintain close vigil on the payments and other IT systems operated by banks and fortifying those for enhanced efficiency and resilience so as to offer seamless and uninterrupted customer service.
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