It said, “Moreover, we anticipate the resolution of weak assets will be delayed until at least fiscal 2022 (March 2022).
will likely be saddled with a large stock of weak loans in fiscal 2022 too. We have assumed only about 100 basis points (bps) improvement in NPLs.”
The steps taken by the government and the Reserve Bank of India should provide some respite by delaying recognition of some of the weaker loans, it added.
On Friday, the rating agency downgraded the issuer rating of private lender Axis Bank from ‘BBB-’ to ‘BB+’. It placed public sector lender Indian Bank (BBB-) on credit watch with negative implications. The public sector bank’s credit profile could weaken over the coming quarters due to Covid-19 as well as the merger with the weaker Allahabad Bank. It also affirmed ratings on seven other Indian banks.
S&P said the economic conditions have turned adverse for Indian banks
due to the outbreak. Drastic efforts to curtail the spread of coronavirus have resulted in a sharp economic contraction.
The government’s stimulus package, with a headline amount of 10 per cent of gross domestic product (GDP), has about 1.2 per cent of direct stimulus measures. The share of direct stimulus is low relative to countries with similar economic impacts from the pandemic. The remaining 8.8 per cent of the package includes liquidity support measures and credit guarantees that will not directly support growth. “We now forecast a five per cent contraction in the economy in fiscal 2021,” said S&P.
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