‘Bank NPAs set to rise, deposit growth outpacing credit flow’

‘Expansion in credit in FY21 was the lowest in four years’

Gross non-performing asset (GNPA) ratios of scheduled commercial banks (SCBs) are expected to shoot up in the coming quarters, according to data compiled by BCT Digital. This is despite the regulatory interventions to provide relief to both borrowers and lenders in the wake of the pandemic. The GNPA for the banking system was at 7.5% in September 2020, an improvement from pre-pandemic levels, and coming after the asset quality review mandated by the regulator. This number is expected to shoot up to 13.5% in a base-case scenario and 14.8% in an extreme scenario by September 2021 as per RBI’s assessment in the latest Financial Stability Report (FSR), said Jaya Vaidhyanathan, CEO of BCT Digital, which helps banks manage risk. “For public sector banks, GNPAs are expected to zoom from 9.7% in September 2020 to 16.2% and 17.6% in the base case and extreme scenarios, respectively, by September 2021,” she added. Though banks were adequately capitalised as on March 31, 2021, RBI Governor Shaktikanta Das on Friday re-emphasised the need for banks to build capital buffers. “Building adequate provisioning and capital buffers, together with sound corporate governance in financial entities, have become much more important than ever before, more so in the context of banks and NBFCs being at the forefront of our efforts to mitigate the economic impact of COVID-19,” he said. Meanwhile as per data from the Financial Stability Report bBanks’ credit and deposit growths are seen moving in opposite directions. While bank customers are found to be getting worried about their future and are saving aggressively, banks, though flush with cash, are not comfortable not seen comfortable to lending, according to analysts.