Categories: Business

Uncertainty over the duration of the coronavirus epidemic persists, thus increasing the risk of economic growth going down

Photo: DNAINDIA

RBI said NPA may rise to 20 year high due to coronavirus

new Delhi. The Reserve Bank of India (RBI) on Friday said that how long will the Kovid-19 epidemic remain, remains uncertain and the economy is at risk of a major collapse in FY 2020-21. Earlier, RBI had said that GDP would decline in the current financial year. However he did not give any figures of decline. But according to analysts, GDP may fall to 9.5 percent.

The central bank said in a half-yearly financial stability report released on Friday that there remains uncertainty over how long the financial year Kovid-19 epidemic will be affected. In such a situation, the risk of economic decline is large. It states that a complete resumption of economic activity will depend on support for a robust health infrastructure, improvement in demand conditions and the smooth functioning of the supply chain.

The central bank said that apart from this global factors like trade and financial condition will also have an impact on the revival. According to the report, economic prospects seem to be severely affected in the near future, given the constraints on both supply and demand levels, lack of customer confidence and risk appetite.

Despite the financial sector regulators and government steps to smooth the functioning of financial intermediaries and address the problems of the disadvantaged people of the society, the threat of short-term economic prospects remains high. Although the cost of debt has come down and the liquidity situation has improved, the flow of finance from both banks and non-banks to the economy did not have much effect due to risk aversion and weak demand. The lockdown was imposed from March 25 to curb the Kovid-19 epidemic in the country. Lockdown continues in many places. This has affected economic activity and overall gross domestic product (GDP).

To mitigate the impact of the crisis and to provide some relief to the people, the Reserve Bank cut the repo rate by 1.15 percent in two phases, including other steps, while the government has announced a stimulus package of Rs 21 lakh crore.

The RBI has warned that due to the corona virus epidemic, bad loans can reach the highest level of 20 years. According to the RBI, bad loans can reach 12.5 percent by March 2021 from 8.5 percent in March 2020. It is also feared that if the situation gets worse, it is expected to reach the level of 14.7 percent. The Reserve Bank has expressed this apprehension in its Financial Stability Report.

This post was published on July 25, 2020 9:22 am

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