Banks' bad debt to rise sharply from 8.5% to 12.5% by March 2021 amid COVID-19: RBI report

The RBI governor said preserving long-term stability of the financial system is the key to recovery of economic growth

Reuters July 25, 2020 09:55:54 IST
Banks' bad debt to rise sharply from 8.5% to 12.5% by March 2021 amid COVID-19: RBI report

Mumbai: The impact of the COVID-19 pandemic is likely to push up the gross non-performing assets in the Indian banking system to at least 12.5 percent by March 2021, from 8.5 percent in March, 2020, a report from the Financial Stability and Development Council said on Friday.

"It may escalate to 14.7% under a very severely stressed scenario," the council’s Financial Stability Report released by the Reserve Bank of India said.

Governor Shaktikanta Das, in his foreword to the report, highlighted the uncertainty to economic growth, but said once the post-pandemic phase was reached the focus would be on calibrated unwinding of regulatory and other dispensations.

"The challenges that lie ahead have to be addressed with the overarching objective of preserving long-term stability of the financial system, which is critical for nurturing the recovery," he added.

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