The RBI report says that the Capital Conservation Buffer (CCB), which came into effect from April 1, 2021, may provide some relief to banks from the problems of raising additional money.
Credit growth of banks has increased by 13.4% in 2018-19 while it has increased by 6.1% in 2019-20. 9% of the loans given by banks have fallen badly. This means that this loan is not coming back
The Reserve Bank of India (RBI) has said that state-run banks need money at this time. The government should put more money in these banks. This will help banks in lending. On Sunday, the RBI said in a report that bad loans (NPAs) have a bad effect on the speed of banks’ loans.
Although the RBI has described this report as personal. The RBI has said that even though the report is from its official, it is a personal opinion.
NPA does not affect monetary policy steps
The RBI has said in the report that the NPA does not affect the steps taken on the monetary policy front. Monetary policy steps will have an impact only when NPAs are not high. Explain that in recent times, NPAs of banks have increased rapidly. It has crossed 9 lakh crore rupees at this time. 9% of the loans that banks have lent have fallen badly. That is, this debt is not coming back.
There is no effect due to ballasts in front of banks
This report titled Bank Capital and Monetary Policy Transmission in India states that many such cases and obstacles arise in front of banks, which reduces the impact of policies decision. The report said that the high level of NPA is a major reason for policies not being affected. The report said that the Capital Conservation Buffer (CCB), which came into force from April 1, 2021, may provide some relief to banks from the difficulties of raising additional money.
There is relief from some steps
RBI has said that some of its steps have helped the public sector banks to come out of their troubles. With this, the credit growth of banks has increased by 13.4% in 2018-19 while it has grown by 6.1% in 2019-20. However, credit growth has been very low so far this year. The report noted that there has been a positive association in the bank’s equity and credit growth. This enables the banking sector to protect its balance sheet from changes in economic conditions.