Bad Loans, NPAs and the IBC
Cleaner Balance Sheets and What Comes Next
By the mid-2020s, bank NPAs fell to multi-year lows, but new risks such as unsecured personal loans and microfinance stress have emerged.
A cleaner system, new worries.
Improvement
Gross NPAs fell to around 2-3 per cent, the lowest in over a decade.
Profits
Banks reported record profits and strong capital.
New risks
Fast growth in credit cards, personal loans and microfinance raised stress in some segments.
Regulation
The RBI raised risk weights for unsecured loans in 2023.
A cautious step
The RBI made banks hold more capital against unsecured personal loans.
Assuming the problem is solved forever
New cycles bring new risks.
Key takeaways
- NPAs fell sharply.
- Profits and capital improved.
- Unsecured loans are a new worry.
- RBI raised risk weights.
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