Prime Minister Narendra Modi will hold meeting with key economic regulators on Thursday.
Though formal agenda is not known, it is expected that the meeting will discuss the current situation in financial market, overall economy, among others. This meeting has been called within 24 hours of meeting with the Managing Directors and CEOs of selected public sector banks (State Bank of India, Punjab National Bank, Bank of Baroda, Bank of India, Union Bank of India, Canara Bank & Indian Bank).
The meeting will have senior Ministers including Finance Minister Nirmala Sitharaman, Commerce and Industry Minister Piyush Goyal and Road Transport Minister Nitin Gadkari.
These meetings are crucial in the backdrop of RBI’s Financial Stability Report, released last week. According to the report, macro stress tests for credit risk indicate that the GNPA (Gross Non-Performing Assets) ratio of all SCBs (Scheduled Commercial Banks) may increase from 8.5 per cent in March 2020 to 12.5 per cent by March 2021. Also, under the baseline scenario the ratio may escalate to 14.7 per cent under a very severely stressed scenario.
The possibility of higher NPA has brought fresh concern for policy makers as this would affect balance sheet of public sector banks. In such a situation, the government will have to provide more capital to ensure banks are financially stable and strong. Now, the government’s finance is already in shambles due to much lower revenue collection and higher expenditure on account of pandemic.
The meeting has also got significant after RBI call on looking for finance arrangement beyond banks for infrastructure projects.