The decline in bad debt and credit growth depend on how fast the economy improves

Mumbai, Ta. 25 December 2019, Wednesday

India's banks are gaining good control over the bad debit situation, and non-banking financial companies (NBFCs) are expected to regain their glory after a year, but the slowdown in credit debits and the growth of credit are the basis of how fast the country's economy recovers. It lives on, the Reserve Bank report said.

Banks and NBFCs have reduced corporate credit in the current recession. The uncertainty in the economy could also increase the default on retail loans, the report noted.

In the first six months of the current fiscal year, the credit to the business sector has declined by Rs. 5, while in the same period of last financial year, credit has increased by Rs. The retail segment that was once considered risk-free is no longer risk-free.

In order to increase their credit, banks have adopted a strategy to focus more on retail loans, but growth in retail loans has been limited as a result of the reduction in private consumption. The report noted that the slowdown in retail growth has increased the likelihood of default in retail loans.

The deteriorating economic growth and slowdown in credit withdrawals and the occurrence of defaults make banks hesitant to provide financing. The improvement in NPAs of banks in FY 7-8 has been seen due to IBC use.

A total of 5 cases were filed in various branches of the National Company Law Tribunal with a sum of Rs. However, only 1.5% or Rs. 5 crore was recovered.

The Reserve Bank welcomes the merger of public sector banks. It is also said that the face of banking sector will change as a result of the merger. The Reserve Bank has observed that while credit financing from the corporate sector has slowed down, while retail credit has increased, it has also increased the likelihood of defaults, which banks will have to be cautious about.

The report also noted that credit to NBFCs has declined due to defaults and rating cuts.