The Reserve Bank of India (RBI) in its bi-annual financial stability report (FSR) says that Bank nonperforming assets (NPAs) may rise to as high as 14.8 pc in one year in case of a severe stress scenario, from 7.5 pc as of September 2020, even as Indian banks are still working out a restructuring package for borrowers hit by the Covid 19 pandemic,

This highlights the need for proactive building up of adequate capital to withstand possible asset quality deterioration, RBI said in its Financial Stability Report (FSR). "Macro stress tests incorporating the first advance estimates of gross domestic product (GDP) for 2020-21 released on January 7, 2021, indicate that the GNPA ratio of all SCBs may increase from 7.5 pc in September 2020 to 13.5 pc by September 2021 under the baseline scenario; the ratio may escalate to 14.8 pc under a severe stress scenario," the financial report said.

 It further stated that in the initial phase of the COVID-19 pandemic, policy actions were geared towards restoring normal functioning and mitigating stress. The focus is now being oriented towards supporting the recovery and preserving the solvency of businesses and households, the report said. "Positive news on vaccine development has underpinned optimism on the outlook, though it is marred by the second wave of the virus including more virulent strains," RBI said.

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