India testing 2020 economy crisis India

Transform risk management to aid a credit revival

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In the post-covid scenario, a significant credit uptake will be critical to support an economic revival. However, the economy has been struggling with low credit off take since 2015.

Between January 2015 and January 2020, a whopping 260 basis points reduction in the Reserve Bank of India's repo rate did not help.

While low credit demand may be a reason, the risk aversion of lenders cannot be ignored. This aversion is driven by the huge non-performing assets (NPA) burden and continued credit blowups at regular intervals.

Ironically, the underlying factor causing this undue risk aversion is also the one that caused the credit boom, which resulted in the NPA burden.

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