NewsR Staff
The Financial Stability Report (FSR) of the Reserve Bank of India (RBI) released today said that stress test results indicated that five banks might fail to meet the minimum capital level by March 2021 in a very severe stress scenario.
The central bank in its report warned that the gross nonperforming assets (GNPA) ratio of all scheduled commercial banks (SCBs) might increase from 8.5 per cent in March 2020 to 12.5 per cent by March 2021. The semiannual report added that if the macroeconomic environment worsens further, the GNPA ratio might escalate to 14.7 per cent under very severe stress.
In the wake of Covid-19, the RBI had announced a six months loan moratorium to all term loans. The moratorium was first given for March-May but was later extended to June-August. Analysts fear at least 5 per cent of the moratorium loans could turn NPAs if Covid-19 impact persists in the economy.
The COVID-19 lockdown has had a significant impact on all industrial activities in the economy resulting in major income loss to many. This, in turn, has impacted the loan repayment ability of borrowers too. Though the number of people who have availed the moratorium in the second round is far less compared to the first, banks have taken aggressive provisions expecting an asset quality shock.
Large borrowers accounted for 51.3 per cent and 78.3 per cent of the aggregate loan portfolio and GNPAs, respectively, of SCBs in March 2020, the RBI said. “Both these shares have declined since March 2018 implying that, on an incremental basis, credit and NPA accretions are occurring in the small borrower category in the recent period, the RBI said
Literally, the small borrowers would feel the heat.
