Write-off era over, asset quality review served banking well

• Recently, the Chairman of SBI stated that the era of loan write-offs is over.
• Asset Quality Review (AQR) initiated in 2015 under the former RBI Governor Raghuram Rajan has been beneficial for the banking system.

Impact of AQR and Improved Lending

• The AQR led to the identification of a substantial amount of bad loans.
• Over Rs 10 lakh crore of bad loans were written off by Indian banks in the past five years.
• Gross non-performing assets (NPAs) have decreased by almost 46% in the last five years.
• Lending by banks has become more informed and improved after the AQR, strengthening risk management and underwriting practices.

Initially Faced Criticism

• The AQR had initially come under criticism by some economists in the government.
• They argued that AQR slowed down economic growth and underestimated the extent of bad loans.

Positive Signs in the Indian Economy

• He said that the Indian economy is in a "golden phase."
• The agriculture sector showed increased economic activity in the second half.
• Positive trends are also seen in the Fast-Moving Consumer Goods (FMCG) sector and across various industries.

Global Economic Comparison

• He also highlighted that the Indian economy is performing well globally.
• A significant portion of our GDP is our domestic economy.
• He also emphasised the challenges in international markets which are impacting India's international trade.

Prelims Takeaway

• Asset Quality Review (AQR)
• Reserve Bank of India