Restructuring on cards in absence of moratorium: HDFC Securities

Financial institutions are likely to exercise 'Restructuring 2' for stressed assets, in the absence of a moratorium, said HDFC Securities.

Accordingly, HDFC Securities, expects banks to remain selective in restructuring stressed assets.

"We believe that NBFCs (lender category) and the MSME sector (borrower category) are likely to witness the highest amount of restructuring," the brokerage firm said in a report.

Besides, the firm expects a stop-start pattern in loan disbursements during Q1FY22, particularly in retail and SME segments, on account of lockdowns and surging second-wave numbers.

"System-wide credit grew by 6 percent YoY with retail contributing to bulk of the credit growth."

"Net additions to credit cards, which had gathered pace during Q4FY21, also slowed down significantly during Apr-May'21."

Furthermore, HDFC Securities said strong deposit momentum is expected on the back of surplus in systemic liquidity, and RBI's accommodative stance to revive growth.

In addition, it expect provisioning to normalise on a YoY basis, although it is likely to remain flat on a sequential basis.

"Lenders are likely to frontload their loan loss provisions during the first half of the year for expected impairments in the portfolio, although our full year estimates on credit costs remain largely unchanged."