RBI signals sprouting of stress in MSMEs and MFIs

New Delhi, 30 Dec (KNN) The Central Bank has cautioned against a rise in bad loans and developing signs of stress in micro, small and medium enterprises (MSMEs) and the microfinance segment.

As a measure, it has called for close monitoring of these portfolios.

According to the Financial Stability Report (FSR) of the RBI, macro stress tests for credit risk indicate that the gross non-performing asset (GNPA) ratio of banks may increase from 6.9 per cent in September 2021 to 8.1 per cent by September 2022 under the baseline scenario and to 9.5 per cent under a severe stress scenario.

NPAs to advances ratio declined from 8.2 per cent at end-March 2020 to 7.3 per cent at end-March 2021, and further to 6.9 per cent at end-September 2021.

Nevertheless, the report claimed that the banks are financially healthy and strong.

Shaktikanta Das, Governor of RBI said “Balance sheets of banks remain strong and capital and liquidity buffers are being bolstered to mitigate future shocks. While the pandemic induced bouts of volatility, spillovers and heightened uncertainty are challenging, the Indian financial system has stood up well and remains well prepared to meet the funding requirements of the economy.”

The reported also stated that MSME portfolio of PSU banks and private banks indicates accumulation in NPA and SMA-2 categories in September 2021 relative to March 2021. NPA level was 18.5 per cent as of September 2021, as against 16.8 per cent in March 2021.

By the end of September 2021 vis-a-vis March 202, the credit to the MSME segment slowed down (y-o-y).

The report also addressed the impact of the new variant Omicron on the global economic recovery and how it has been losing momentum in the second half of 2021 due to supply disruptions, elevated inflationary levels and shifts in monetary policy stances and actions across economies.