MUMBAI: Banks and non-bank lenders are likely to see a spike in their stressed assets in the current fiscal as slower economic activity amid the coronavirus pandemic may affect debt servicing capabilities of borrowers, says a report.
The spike in reported non-perfoming assets (NPAs) would be reflected over the next few quarters, rating agency Icra said. It expects GDP growth to slow to 2% during financial year 2020-21 from estimates of 4.4% in 2019-20.
"The asset quality pressure for banks and non-banks (NBFCs) is expected to increase in FY21, notwithstanding the three-month moratorium provided by the Reserve bank of India (RBI) to borrowers on their loan repayments," the rating group head (financial sector ratings) Karthik Srinivasan told reporters through a webinar.
He said the actual increase in the quantum of NPAs for banks and NBFCs will be known after some more days. Last week, the Reserve Bank of India (RBI) gave a relief package for retail borrowers and businesses by announcing a three-month moratorium on payment of all term loans falling due between March 1, 2020 and May 31, 2020.
"We expect the asset quality stress is likely to reflect with a lag of 1-2 quarters post the removal of the moratorium and the stress will vary across segments," he said. In case of banks, he said, NPA generation will increase as compared to an earlier expectation of moderation in bad loans.
"Credit costs to remain elevated and recoveries will get pushed back for banks," he added. The gross slippage rate for state-owned banks is likely to be 4.5-5% and the provision coverage ratio (PCR) may decline to 57-60%, the rating agency said.
