Deferred recognition of Covid-19 driven loans, one of the main reasons for the decline in reported NPAs and higher profits for banks, will bring more NPAs into the reckoning, especially with the regulatory forbearance on restructured standard advances (RSAs) coming to an end on March 31, 2022 (The RBI had allowed banks to give a two-year moratorium in repayments under the restructuring scheme). “There is a possibility of RSAs relapsing into NPAs due to different waves of Covid-19 affecting the industry from time to time, as the facility can be availed only once,” says Ramnath Pradeep, former chairman and MD, Corporation Bank.
“We remain watchful of the stress emanating from RSAs of banks, which we estimate to be 3% of their advances,” says Anil Gupta, vice president & co-group head, financial sector ratings, ICRA.
Frauds Far From Over
Besides, the string of corporate frauds on banks seems endless. The ₹22,842-crore ABG Shipyard bank loan fraud, billed as the biggest among its ilk and affecting 28 banks, including State Bank of India, is only the tip of the iceberg. Other skeletons are tumbling out of the closet slowly, highlighting the bigger malaise within, which is set to weaken the banking system further. Most of these loans have been provided for fully by banks.
It all started with Kingfisher Airlines and Nirav Modi (involving around ₹10,000 crore each in fraudulent activities). But the loan fraud that shook the financial system as a whole was that of the…
