Write-off era over, asset quality review served banking well
- Recently, the Chairman of SBI stated that the era of loan write-offs is over.
- Asset Quality Review (AQR) initiated in 2015 under the former RBI Governor Raghuram Rajan has been beneficial for the banking system.
Impact of AQR and Improved Lending
- The AQR led to the identification of a substantial amount of bad loans.
- Over Rs 10 lakh crore of bad loans were written off by Indian banks in the past five years.
- Gross non-performing assets (NPAs) have decreased by almost 46% in the last five years.
- Lending by banks has become more informed and improved after the AQR, strengthening risk management and underwriting practices.
Initially Faced Criticism
- The AQR had initially come under criticism by some economists in the government.
- They argued that AQR slowed down economic growth and underestimated the extent of bad loans.
Positive Signs in the Indian Economy
- He said that the Indian economy is in a "golden phase."
- The agriculture sector showed increased economic activity in the second half.
- Positive trends are also seen in the Fast-Moving Consumer Goods (FMCG) sector and across various industries.
Global Economic Comparison
- He also highlighted that the Indian economy is performing well globally.
- A significant portion of our GDP is our domestic economy.
- He also emphasised the challenges in international markets which are impacting India's international trade.
Prelims Takeaway
- Asset Quality Review (AQR)
- Reserve Bank of India