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BHOPAL: Some of the high Non Performing Assets (NPA) identified by the banks include the tourism and hospitality sector at the top. While other sectors are on a recovery path, chances of revival of the tourism sector fades again with the second wave of corona in the country.

A survey conducted by FICCI (Federation of Indian Chambers of Commerce and Industry) in association with the Indian Banks’ Association found that NPA is expected to rise substantially in the tourism and hospitality sector. Other sectors like MSME (Medium, Small and Micro Enterprises) are also at risk but are likely to recover.

Considering government policies and vaccination drive the second wave of covid pandemic is expected to make less impact as special relaxations have been given to the industries. However, tourism and hospitality remains the biggest casualty.   

Some of the high NPA risk sectors identified by majority of respondent bankers in survey include tourism and hospitality, MSME, Aviation and Restaurants. Another high NPA risk sector reported in the survey is the MSME sector; with 84% respondents (banks) expected an increase in NPAs in this sector. Almost 89% respondents also expect restaurants to see an increase in NPAs, though only 26% expect NPAs to increase substantially in this segment.

The overall NPA levels for the second half of 2020 had seen an improvement. Bank wise analysis reveals that major improvement in NPAs has come from the Public Sector Banks. About 78% of participating PSBs have cited a reduction in NPA levels. This can be attributed to an improvement in asset quality, especially with improved recoveries and higher write-offs by several banks.

Moreover, due to Covid-19 pandemic, the Supreme Court had ordered all banks not to classify Covid-19 related defaults as NPAs. Amongst the sectors that continue to show a high level of NPAs, most of the participating bankers identified sectors such as Infrastructure, Metals, iron & steel, Real Estate and Engineering Goods. Other sectors identified as high NPA sectors include Gems & Jewellery, Cement, Retail, Petroleum products and Automobiles.

However, in terms of outlook, nearly 68% of respondent bankers expect the NPA levels to be above 10% in the first half of 2021. 37% of respondents in-fact expect NPA levels to be upwards of 12%. In the RBI Financial Stability Report which was released in January 2021, under stress test under baseline scenario, GNPA could go up to 13.5 per cent by September 2021.These figures may vary if lockdown is imposed again.

The Covid-19 induced crisis had led to decline in credit growth across many sectors since the introduction of lockdown. Infrastructure, Pharmaceuticals and Food Processing are witnessing a rise in long term credit according to the survey respondents. Particularly for the pharma sector, 45% of the banks have indicated an increase in long term loans.

“Industries have suffered a severe blow due to corona pandemic. But the government has learnt lessons from the unprecedented therefore the second wave will cause less damage,” said Dinesh Patidar, State President of FICCI, MP chapter.

Survey

Twenty Banks responded to the survey, representing a mix of public sector, private sector and foreign banks. Together, these banks constitute about 59% of the total banking asset size. Expectations are for the period January to June 2021.

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Special relaxations to Industries

The Covid-19 induced crisis had led to decline in credit growth across many sectors since the introduction of lockdown. NPA is expected to rise substantially in tourism and hospitality sector. Considering government policies and vaccination drive the second wave of Covid pandemic is expected to make less impact as special relaxations have been given to the industries.

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