Regulatory forbearance to contain NPAs in FY22: Current Affairs Special Series

Team Adda247 and BankersAdda are here with a Current Affairs Special Series. In this series, candidates will be introduced to current affairs topics daily, which will not only improve their general awareness but also will ensure that the candidates do not lack in any current affairs topic. Today’s Current Affairs topic is Regulatory forbearance to contain NPAs in FY22.

Regulatory forbearance to contain NPAs in FY22

Non-performing assets (NPAs) of banks are set to rise 8-9% in this fiscal. As per the data of rating agency firm CRISIL shows that it was below the peak of 11.2% at the end of fiscal 2018 as relief measures contained stress.

What is the meaning of Regulatory forbearance?

Forbearance means restraint and tolerance. A regulatory policy that is implemented by central banks and other regulatory authorities, which permits banks and financial institutions to continue operating even when their capital is fully depleted. It is also called capital forbearance. 

Covid-19 relief measures such as the restructuring distribution and the Emergency Credit Line Guarantee Scheme (ECLGS) are expected for helping in capping the rise. With 2% of the bank, credit is anticipated under reconstituting by the end of this fiscal, stressed assets-comprising gross NPAs and loan book under restructuring should touch 10-11%. CRISIL rating agency of India has made these estimates factoring in a 9.5% growth in FY22. The retail and MSME segments which together form 40% of bank credit which are expected to see a higher accumulation of NPAs and stressed assets this time around. 

Home loans the largest segment in terms of disbursed amount will be the least impacted in the pandemic. While secured loans are expected to bear the brunt of the pandemic as per CRISIL. The corporate segment is going to be far more resilient due to a review of its large part of portfolio five years ago. A strong recovery has also been seen in a rural segment which was hit harder during the second wave of the pandemic. In agriculture, segment stressed assets are might to remain relatively stable.