The total burden of NPAs on public sector banks stood at Rs 9.35 lakh crore in September 2019. It is believed that it will double in the Corona crisis. In such a situation, banks may need fresh funds of Rs 1.5 lakh crore.
The banking sector was already very bad, but there is every possibility of a big increase in bad loans due to corona, the government is well aware of this. Finance Minister Nirmala Sitharaman, after the announcement of the Self-Reliant India Package, has been constantly asking banks not to bother in disbursing loans and remember that the government is guaranteeing this. Government sources are quoted as saying that in view of the financial condition of the banks, $ 20 billion (about Rs 1.5 lakh crore) is required to be invested in this sector.
The possibility of doubling the burden of bad loans
It is believed that due to Corona epidemic, the burden of bad loans on banks is going to be almost double. Referring to a source, the news agency Reuters said that earlier the government was thinking about a special budget bank re-capitalisation of Rs 25 thousand crore. But the corona crisis is so severe that it has now been pushed forward.
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Decision possible in the second half
Another source said that the capitalisation plan has not been put on hold. It is possible that the government may consider this direction in the second half of the financial year (October-March). Recently, Minister of State for Finance Anurag Thakur also said that the steps taken so far are about the current situation. According to the need, more important steps will be taken in the coming days. The government is seriously thinking in this direction.
9.35 Lakh Crore NPA in September 2019
Talking about NPAs of banks, the total NPAs of banks in September 2019 was around Rs 9.35 lakh crore. At that time it was close to 9.1 percent of his total assets. Recently, Reuters had also said in a report that due to corona epidemic, the burden of bad loans could reach 18-20% of their total assets.
Full Estimate of Decrease in GDP
The entire country has been under lockdown for almost two months due to which the economy has collapsed badly. Millions of people have also been unemployed. All rating agencies say that GDP can fall by 5 percent or more.
How will re-capitalization Happen?
Regarding re-capitalization, sources say that it is not possible for the government alone to infuse so much capital. Bonds may be issued for this, which have also been done in the past. Apart from this, the Reserve Bank can also do it through fiscal deficit monetization.
No Decrease in Landing Speed
In the last five years, liquidity infusions of Rs 3.5 lakh crore have already been done for public sector banks by the government. There was no mention of capital infusion in the budget 2020-21. The speed of loan disbursement has decreased during the Corona period, but the government wants that due to the crisis it is not affected and the lending speed of the bank keeps increasing at the rate of 6-7%.
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