Fall in NPAs: Standstill clause helps paint a rosy picture

While tackling the perennial problem of non-performing assets has always been a major challenge for the banking sector, an asset standstill clause provided by the Reserve Bank of India (RBI) as a relief to the economic stress due to Covid-19 pandemic has led to a decline in non-performing assets in September 2020. Gross non-performing assets of commercial banks – which stood at 9.1 per cent of total advances in March 2019 – came down to 7.5 per cent in September 2020. The corresponding figure for March 2020 was 8.2 per cent. Nevertheless, the true picture of economic disruptions will reveal itself once the special measures are rolled back. In addition, the usual practice adopted by banks to write-off debts and the Insolvency and Bankruptcy Code also helped bankers to clear their books.