If 2020 wasn't bad enough for the financial sector, then 2021 is right around the corner with a much rougher ride.
On The Decline
The Indian Banking & Non-banking financial sectors were affected gravely by the pandemic but showed some steely resilience to stay afloat till the end of the disastrous year but it looks like 2021 isn't going to be any better.
With almost 40% of outstanding loans under moratorium, RBI predicts a sharp deterioration in asset quality for financial houses going forward.
The annual Report on Trend and Progress of Banking in India by the RBI showcased strengthened asset quality, capital positions and profitability for the current year but also forecasts warning signs for banks and non-banks in the following year as the report suggests that the true gravity of the aftermath of the virus will be known.
Bad Loan Ratio
The report also showed how the gross non-performing assets (GNPAs) ratio of scheduled commercial banks declined from 9.1% at end-March 2019 to 7.5% at end-September 2020. On the other hand the capital to risk-weighted assets ratio (CRAR) strengthened substantially.
Bottomline: For the banks to scrape through, the economy has to improve greatly, but with how things are it seems to be quite a stretch to hope for.