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SIGNIFICANT RAISE IN NPA DUE TO THE CRISIS OF COVID-19

Courtesy/By: THEJA G SHASTRI | 2020-07-30 12:10

SIGNIFICANT RAISE IN NPA DUE TO THE CRISIS OF COVID-19 

 The COVID-19 Pandemic which is undoubtedly one of the biggest global crises of our lifetime, which has affected a lot of industries and even individual’s source of income. A lot of companies, industries are temporarily shutting down their operations in India, because of which the employment crisis has occurred in our country. Due to an unfortunate situation which the entire country is facing now, the economy has decreased in a every possible way and the nation is facing financial problems. Hence, the borrowers are unable to repay the loan amount to the bank, because of which Non-Performing Asset (NPA) has been increasing. Here, NPA (Non-Performing Asset) is a loan or advance for which the principal or interest payment remained overdue for a period of 90days 

According to the 21st issue of The Financial Stability Report released by RBI; it has stated that the GNPA (Gross Non-Performing Assets) of banks may rise to 12.5% by March 2021 due to the COVID-19 pandemic. And this raise in NPA could be the highest in 20 years according to the recent report by RBI. 

 As of March 2020, the ratio of NPA of all commercial banks stood at 8.5% of total advance. But because of COVID-19 crisis, in a very severe stressed scenario, the gross NPA of the banking sector might rise to as high as 14.7% of total loans by March 2021. 

 Under a baseline scenario, gross NPA ratio could rise to 12.5%. And especially with the COVID-19 the pressures from the Pandemic and National Lockdown are likely to significantly push up the Non-Performing Assets. According to the RBI, recent reports say that 50% of the account holders are accounted for the outstanding loans from March 2020 as RBI had given relief measures to tackle the lockdown impact which is going to end on August 31st 2020, but the analysts in RBI are petrified that if COVID-19 hangs on in the country, it is going to be affected negatively for the moratorium loans. 

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Courtesy/By: THEJA G SHASTRI | 2020-07-30 12:10