At the end of June, the gross NPA level of the banking system was 7.5 per cent and the capital adequacy level was around 16 per cent, which gives an adequate cushion, Das said.
Reserve Bank of India
Reserve Bank of India (RBI) Governor Shaktikanta Das on 9 September said the current levels of non-performing assets (NPA) looks manageable. A loan becomes NPA if there is no repayment if interest or principal for a period of 90 days.
At the end of June, the gross NPA level of the banking system was 7.5 per cent and the capital adequacy level was around 16 per cent, which gives an adequate cushion, Das said at an event.
Also, the restructuring packages offered by the central bank last year and this year stipulates that banks have to make adequate provisions, Das said. “The restructuring schemes aren’t open ended. Banks have to make provisions,” said Das.
The RBI has been pushing banks to raise their capital levels and increase provisions to guard against likely asset quality shocks in the banking system. The regulatory relaxations announced by the central bank have significantly helped the stressed borrowers to avoid an immediate shock in the aftermath of Covid-19.
Speaking on the recovery from the insolvency and bankruptcy process, Das admitted that there is some scope for recovery. Primary objective of IBC is resolution of bad assets so that the company continues operations, Das said, adding while there are cases where haircut is significant, in some cases it is less.
“There is scope for improvement in IBC process,” Das said, adding it may even require some legislative amendments.