NPL Rises To 9.85% As Banks Exit Regulatory Forbearance

The recent increase in non-performing loans (NPLs) to 9.85% marks a significant development in the banking sector, as banks exit regulatory forbearance. The industry liquidity ratio rose to 69.27 per cent in February from 63.38 per cent in January, remaining well above the prudential minimum of 30 per cent. This improvement in liquidity suggests that banks have been able to manage their asset quality and maintain a stable financial position. However, the increase in NPLs indicates that banks are now facing the consequences of their previous lending decisions, which may have been facilitated by the regulatory forbearance. As banks continue to transition out of this period, they will need to focus on strengthening their risk management practices and improving their credit assessment processes to mitigate the risk of further NPL growth.