Higher NPAs hinder monetary policy transmission: RBI paper

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 Higher NPAs hinder monetary policy transmission: RBI paper



High incidence of non-performing assets (NPAs) in banks acts as a major roadblock in transmission of monetary policy actions of the Reserve Bank, a working paper prepared by the officials of the central bank said.

The working paper also made a strong case for capital injection in state-owned banks, arguing that such a move would increase the credit flow to the real sector in addition to ensuing smoother transmission of monetary policy.

"Presence of non-performing assets in a bank also weakens monetary policy transmission and lowers the loan growth rate," said the working paper co-authored by Silu Muduli and Harendra Behera, Department of Economic and Policy Research (DEPR), RBI.

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