Cautioning the government against "any early euphoria" regarding the decline of non-performing loans in the banking sector, a Parliamentary panel said Tuesday that bad loans may increase as a result of the Covid pandemic's lag effect.

The Standing Committee on Finance noted in its report to Parliament that the financial system appeared to have fared well in terms of nonperforming assets (NPAs). during the pandemic shock  Contrary to the RBI's Financial Stability Report projections of commercial banks' gross non-performing assets increasing from 7.48 percent in March 2021 to 9.8 percent in March 2022, the panel was informed that gross non-performing assets for public sector banks decreased from 9.11 percent on March 31, 2021, to 7.9 percent at the end of December 2021.

 "The Committee would like to advise against premature euphoria on this score, as the epidemic may still have some lag effects on the banking sector," the report stated. Additionally, it stated that it is required to absorb excess liquidity infused as part of the pandemic response to stimulate the economy, as there is a chance of an increase in non-performing loans. The panel concluded that caution is still essential and that the government's efforts to decrease NPAs and effect recovery should be maintained with the same zeal. Concerning the digital economy and the rise in online frauds, the panel stated that if victims report digital frauds, the onus for timely redress should be on the responsible banks and financial institutions. The customer should not be left in a lurch running from pillar to post for grievance redressal, it said.

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