Banks asset quality may take further hit due to coronavirus: Report

| | Mumbai
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Banks asset quality may take further hit due to coronavirus: Report

Thursday, 26 March 2020 | PTI | Mumbai

The outbreak of COVID-19 and continued slowdown in the economy are likely to have an impact on banks asset quality and may trigger a surge in gross non-performing assets (GNPA) ratio to 9.6 to 9.9 per cent by the second or third quarter of the next fiscal, says a report. The global pandemic has stalled the economic activity which is going to severely impact sectors such transport, travel and tourism, aviation, among others.

The Reserve Bank and the government may announce a regulatory forbearance or an interest subvention scheme on report by Care Ratings loans to help banks deal with the NPA stress, according to a report  it said.

“Considering that there has been no substantial improvement in the economy, ageing provisions and coupled with the recent outbreak of ‘COVID-19’, the banking sector might witness an adverse impact on credit delivery and asset quality leading to pressure on capital adequacy,” the rating agency’s senior director, Sanjay Agarwal, said in the report.

The GNPA ratio of banks is likely to be in the range of 9.6-9.9 per cent by the second or third quarter of FY21 from 9.3 per cent as of December 2019, given the exposures to certain stressed sectors, moderation in the bank credit growth and muted demand scenario, he said.

The rating agency said as there is a lockdown imposed within India and the world, both domestic consumption as well as export-oriented industries could be affected due to muted demand.

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