Attention has tended to focus on the stable gross non-performing assets (GNPA) ratio between March and September 2019 at 9.3%, in the December edition of the Reserve Bank of India’s Financial Stability Report. However, the RBI notes that this ratio could worsen to 9.9% by September next year, both on account of slippages and because of lower credit growth. While companies smaller than Rs 5,000 crore have been deleveraging, their debt/equity ratio shrinking, very large companies have been piling on debt, driving credit growth and raising their debt/equity ratio. The RBI estimates the financial system to be reasonably robust. But the unstated inference from the Financial Stability Report is that economic growth and revival of corporate investment are essential to make financial system robust.

Source: Economic Times December 30, 2019 17:26 UTC