Banks’ bad loans are frozen, take data at face value
There is a risk of a further increase in NPAs amid the permanent loss of GDP due to the slowdown
Usually, in challenging times like economic growth slowdown, the non-performing asset (NPA) levels tend to move up as businesses are part of the same system. In today’s scenario, GDP growth plunged to negative 23.9% in the April-June 2020 quarter and was negative 7.5% in the July-September quarter. Remarkably, banks’ NPA levels showed improvement in this phase. This is commendable, but there is a nuance here. The Supreme Court of India in a public interest litigation (PIL) case of Gajendra Sharma versus Union Bank of India, in an interim order dated 3 September 2020, had directed that the accounts which were not declared as NPA till 31 August 2020 shall not be declared as such till further orders. That is, bank NPA levels were frozen as on 31 August 2020.