Falling NPAs can give a 60-bps booster shot to GDP this fiscal

April 15, 2019 17:30

The rise in banks' profitability, thanks to a steady decline in dud assets, can give a 0.60- percent boost to GDP in fiscal 2020, says a report. This will be possible due to the rise in profits on the back of a decline in credit costs, which is the money that banks set aside to deal with bad loans, will help banks lend more money to productive purposes, it said.

"The fall in credit costs implies a positive supply impact of 1.40 percent to credit growth, which can boost real investment growth by 2 percent and real GDP growth by 0.60 percent financial year," a report by American brokerage Goldman Sachs said Monday.

The Reserve Bank earlier this month pegged FY20 GDP print at 7.2 percent, down 20 bps from its February forecast. The brokerage estimates credit costs as a proportion of the total outstanding loans will nearly halve to 1.20 percent in FY20 from the peak of 2.30 percent in FY18. In absolute terms, the fall will be to the tune of Rs 1.9 lakh crore from Rs 3.3 lakh crore. Credit growth has already been coming in at a multi- year high for the last few fortnights, and printed at 13.24 per cent for the fortnight to March 29. -- PTI

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