With bad loans of the banks expected to rise due to Covid-19-related stimulus handouts, RBI Governor Shaktikanta Das Saturday asked all lenders to conduct a stress test to identify the impact of the pandemic on them and address their vulnerabilities.
“Coronavirus pandemic will result in high NPAs and capital erosion of banks and other financial institutions. It is obvious. It happens after every calamity. But the primary focus now should be to identify the vulnerability and take necessary corrective measures,” Das said addressing the Banking and Economic Conclave of State Bank of India.
He said the RBI is working with banks to strengthen internal risk identification and asset quality of banks.
He also stressed on the need for further recapitalisation of public sector banks to help them strengthen their balance sheets.
Shaktikanta Das said that the economy is showing signs of getting back to normalcy. But it is still uncertain as to when the demand in the system will revive and therefore unwinding of measures to combat Covid-19 should be carefully taken.