Extension of moratorium and one-time restructuring of loan could pose challenges to lenders, and also impact their financial stability if the quantum is large, rating agency Icra said in a report on Wednesday.
The six-month moratorium given by RBI ends on August 31 and the note from Icra comes on the eve of RBI's credit policy review, where the regulator also announces changes on the regulatory front. Many voices have been seeking continuation of some relief in repayments because of the lackluster economic conditions.
Asset quality risks due to the relief given by RBI continue to be elevated for all financiers even as lenders have reported a reduction in quantum of assets under moratorium, Icra said.
Finance Minister Nirmala Sitharaman has said the government is in discussion with RBI on a restructuring, amid reports that it may be a sector specific relief that may be in works.
"Both one-time restructuring and extension of moratorium could pose challenges to lenders not only in implementing the same but also on their financial stability if the quantum is large," the rating agency said.
"As the lenders may continue to have discretion on extending the moratorium, a one-time sector specific restructuring may also create implementation challenges, given the inter-linkages with various sections of the economy," it added.
Icra's sector head for financial sector Anil Gupta said a higher share loans under moratorium for a prolonged period or loans restructured by a lender would reflect incipient stress in the asset quality and will be credit negative for the lenders unless such losses are sufficiently offset by timely capital raise.
The agency estimated the median loans under moratorium to be around 25-30 per cent compared to a broad band of 10-50 per cent of total loan books with many of the borrowers being common under Phase 1 and 2. In general, the moratorium levels across banks are lower than those of non banking financial companies (NBFCs) with private banks having even relatively lower levels. Early trends for July 2020 indicate a nominal improvement in collections over June levels but remain considerably lower than the pre-COVID-19 levels of around 90-95 per cent for most asset classes, it said.
Unlike the previous experience of large borrowers not paying, current trends suggest a greater stress among borrowers in micro small and medium enterprises (MSMEs), agriculture and retail (especially self-employed) segments, it said.
Given the present capitalization levels, a 5 per cent increase in stress due to the pandemic would pose a risk to capital buffers of some lenders in the current fiscal itself, it said.
It reiterated that state-owned lenders will have to raise capital of up to Rs 82,500 crore and Rs 48,300 crore by the private banks in FY22.
