The Parliamentary standing committee on finance has cautioned the government against any “early euphoria” over the recent reduction in bad loans in the banking system, stating that the lag impact of the pandemic may push up non-performing assets again. However, the panel, in a report tabled in Parliament on Tuesday, noted that the banking system appears to have absorbed the Covid shock well as far as bad loans are concerned.
The panel’s observation came in response to the submission that gross NPA ratio for public sector banks has eased from 9.11% as of March 31, 2021, to 7.9% at the end of December 2021. This was contrary to the projection of the RBI’s Financial Stability Report that gross NPA ratio of commercial banks could rise from 7.48% in March 2021 to 9.8% by March 2022, it was informed.
“The Committee would like to caution against any early euphoria on this count, as there may still be some lag impact of the pandemic for the banking sector in the pipeline,” the report said.
The panel suggested that the steps taken by the government to ease the NPA level and to drive up recovery from defaulters should continued with the same vigour.
Extend guaranteed loan scheme for MSMEs: panel
The Parliamentary Standing Committee on Industry has suggested that the repayment period under the Rs 5 trillion guaranteed loan scheme for MSMEs and other businesses be extended up to seven-eight years. At present, the repayment time-frame of three-four years, including the moratorium period, under the Emergency Credit Line Guarantee Scheme is a too short for Covid-hit MSMEs that are struggling to survive from the second wave of Covid, the committee’s report said.