BQ - Samudra Manthan of our Financial Sector
(The following article appeared in BQ on May 14, 2020 - URL below: https://www.bloombergquint.com/coronavirus-outbreak/covid-19-a-samudra-manthan-of-our-financial-sector ) Making Our Financial Sector Fit for Growth Delhi, we have a problem Our financial services ecosystem is in trouble. Even before Covid-19, beyond the smokescreens, the true Gross Non-Performing Assets (NPAs) across banks and NBFCs probably stood at 12% of the INR 140 lakh crores of advances. Covid-19 could well push this to 20% of advances. This fear is reflected in the current state of savings, lending and credit markets. Status quo and forbearance can at best keep the ecosystem undead. Instead, we need the ecosystem to be fit enough to fuel our growth aspirations with adequate flow of credit. China’s credit to the non-financial sector is at 259% of GDP. India’s is at 126%. When credit fuels jobs and output, it can trigger the virtuous cycle of supply, consumption, investment and savings that India sorely ne