Policy roll-back may dent banks’ health, says RBI

• Report presents the performance of banking sector, including co-operative banks, and non-banking financial institutions (NBFCs) during 2019-20 and 2020-21 so far.

• Broad theme of this year’s report is impact of COVID-19 on banking and non-banking sectors.

Key highlights:

• RBI undertook an array of policy measures to mitigate the effects of COVID-19, its regulatory ambit was reinforced by legislative amendments, giving it greater powers over co-operative banks, NBFCs, and HFCs; of initiatives to bolster its supervisory framework.

• Scheduled commercial banks gross non-performing assets (GNPA) ratio declined from 9.1% at end-March 2019 to 7.5% at end-September 2020.

• Performance of state co-operative banks improved, both in terms of profitability and asset quality.

• Recovery process gained traction with the resolution of large accounts through IBC and SARFAESI channel.

• Most payments banks are yet to turn profitable and their sources of income may come under strain with the increased unemployment and reverse migration.

• NBFCs remained resilient with strong capital buffers.

• Housing financiers could see a substantial impairment in their loan assets because of delays in completion of housing projects, cost overruns and delayed investments by home buyers.

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Mains Paper 3: Economy

Prelims level: Not much

Mains level: Policy measures to mitigate the effects of COVID-19

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