Parliament panel says pandemic impact could fuel bad loans

A parliamentary panel has warned that a delayed impact of the pandemic could fuel bad debts

New Delhi:

Asking the government to refrain from showing “any early euphoria” on the reduction of non-performing assets (NPAs) from banks, a parliamentary panel said that due to some “lag impact” from the coronavirus pandemic , there could be an increase in bad debts .

The Standing Committee on Finance, in its report which was tabled in Parliament today, noted that while the banking system appears to have weathered the pandemic shock well with respect to NPAs, “(the committee) is keen to highlight Beware of any early euphoria on this, as there may still be some lag of the pandemic on the banking sector.”

He further said that there is a need to absorb excess liquidity that has been injected as part of the pandemic response to stimulate the economy as there might be a possibility of increased NPAs.

The panel was of the view that caution is still in order and that the measures taken by the government to reduce NPAs and effect the clawback should be pursued with the same vigor.

The committee was informed that contrary to the projections in the RBI Financial Stability Report that the gross NPA ratio of commercial banks would decline from 7.48% in March 2021 to 9.8% by March 2022, the NPA figures at gross level for public sector banks decreased from 9.11% at March 31, 2021, to 7.9% at end December 2021.

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