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PM Modi to meet banks, NBFCs tomorrow to discuss financial sector
The meeting comes in the backdrop of a slowing economy and a slumping GDP growth outlook.
Prime Minister Narendra Modi will be joining banks and non-banking financial companies (NBFCs) tomorrow evening to deliberate on the vision and roadmap for the future, tweeted his office on Tuesday.
“The topics on agenda include credit products & efficient models for delivery, financial empowerment through technology, prudential practices for stability and sustainability of the financial sector,” said the Prime Minister’s Office in another tweet.
The meeting assumes significance as the credit growth has slumped amid the economic slowdown that is caused by the coronavirus-induced lockdown. With businesses shut for so long, the bad loans are expected to pile up.
In its latest Financial Stability Report, the RBI has projected that gross non-performing assets may rise from 8.5 percent to 12.5-14.7 percent by March 2021 depending on the severity of stress in the economy.
The country’s bad loan ratio was already one of the highest among major global economies at 8.5% at the end of March 2020. If the macro-economic environment takes a turn for the worse later this year, the ratio may escalate to 14.7% under the severely stressed economic scenario, the RBI said in its report.
At present, a moratorium provided on loan repayments for businesses and individuals is providing some relief for struggling businesses, but lenders may find a wave of loans turning into bad debt after that relief ends in August, the RBI cautioned.
The top priority right now for all banks and financial firms should be to hike capital levels and improve resilience, the RBI governor said.
As liquidity becomes limited in the wake of the Covid-19 pandemic, small and mid-sized non-bank financiers are going extremely slow on new loans, to a point when it is almost down to a trickle.
For instance, the likes of IIFL Finance and Edelweiss Financial Services want to completely exit the wholesale loan business in the next couple of years by down-selling these assets. Nirmal Jain, chairman and chief executive, IIFL Finance told Mint in an interview that the NBFC industry is reorganising itself. “Things are not very easy,” said Jain.
