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The Reserve Bank of India (RBI) has said that banks would need to support growth while being watchful of the credit behaviour of the restructured advances and possibility of increased slippages arising from sectors that were relatively more exposed to the pandemic. It said banks had extended moratorium on repayment of loans and restructured advances to businesses to help them combat the impact of the COVID-19 pandemic and subsequent lockdowns.

According to the report, with the unwinding of support measures, some of the restructured accounts might face solvency concerns, and the impact on banks' balance sheets will become clearer in the upcoming quarters. It said that prudence warrants proactive recognition of any non-viable accounts to activate timely resolution. It also stated that the gross non-performing assets (GNPA) ratio of all scheduled commercial banks (SCBs) moderated to its lowest level in six years, aided by efforts towards recoveries and technical write-offs. It said going forward, as the economy recovers and credit demand rises, banks will need to focus on supporting credit growth while being vigilant of the evolving risks. Care needs to be taken to ensure that fresh slippages are arrested, and banks' balance sheets are strengthened to avoid future build-up of stress.

It further said bank credit growth has begun to pick up to track nominal GDP growth and lenders are regaining bottom lines. It said bank credit to commercial sector improved and aggregate deposits moderated with the ebbing of precautionary savings and bank credit growth picked up, especially since August 2021, and it was broad-based. During 2021-22, against the target for agricultural credit of Rs 16.5 lakh crore, banks achieved 104 per cent of the target (Rs 17.09 lakh crore) as on March 31, 2022. The banking sector was cushioned against the disruptions caused by the pandemic by adequate liquidity support and various regulatory dispensations provided by the Reserve Bank.