Finance Minister Nirmala Sitharaman declined to comment on it, saying the government would sit down with the RBI to understand the situation.
The gross NPA ratio of banks may increase from 9.3 per cent in September 2019 to 9.9 per cent by September 2020 “primarily due to changes in the macroeconomic scenario, a marginal increase in slippages, and the denominator effect of declining credit growth”, according to the RBI’s Financial Stability Report
(FSR), released on Friday.
According to the FSR, the regulator conducted macro stress tests for credit risks to assess the banking system’s resilience to macroeconomic shocks under baseline conditions. It assumed continuation of the current economic situation in the future. Kumar countered the RBI’s methodology in the FSR to arrive at the projected NPA figures by doing a stress test over a period of six-seven years.
“It’s based on default test of frauds and NPAs
which have taken place over a period of six-seven years. If you take into account the previous three-four years, the picture will be totally different as the NPA of the period of stress in the past has been duly recognised today,” he added.
The net NPA ratio declined to 3.7 per cent in September 2019 from just below 4 per cent in March 2019, reflecting increased provisioning.
The government further said a report by rating agency ICRA, which showed that the bank credit was expected to grow at its slowest pace in around six decades in 2019-20, may be misleading. “This is based on loan outstanding. But it does not consider the pre-payments and recoveries which are taking place. Loan book may not show increase but credit growth is happening. A robust recovery rate will reduce the size of the loan book,” Kumar said.