ETBFSI DeskThe asset quality pressure for banks and non-banks (NBFCs) is expected to increase in FY2021, despite the three-month moratorium provided by the Reserve bank of India (RBI) to borrowers on their loan repayments. The GDP growth is expected to slow down to 2.0% during FY2021 (-4.5% during Q1FY2021) from estimates of 4.4% in FY2020. On the back of a slowing GDP growth and curtailment of discretionary expenditures across the value chain, it is believed that borrowers will continue to face challenges for some time on normalisation of business conditions across the asset classes once the lockdown is lifted,” said ICRA. Karthik Srinivasan, Group Head – Financial Sector Ratings, ICRA expects the asset quality stress to continue for next 1-2 quarters. “The level of stressed assets in relation to the core equity is expected to increase, thereby weakening their solvency profile. The ability of the borrowers to improve the roll backs from the overdue buckets across segments will be key monitorable.”Entities with higher share of asset classes, such as microfinance, commercial vehicles and MSMEs, etc, will be more vulnerable on the core operating profitability as well as the credit provisions and will see the greater adverse impact on ROA.Expectation on… Read full this story
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