Munbai/New Delhi, May 4: India expects bad debts at its banks could double after the coronavirus crisis brought the economy to a sudden halt, a senior government official and four top bankers said.
Indian banks are already grappling with 9.35 trillion rupees ($123 billion) of soured loans, which was equivalent to about 9.1% of their total assets at the end of September 2019.
"There is a considered view in the government that bank non-performing assets (NPAs) could double to 18-20% by the end of the fiscal year, as 20-25% of outstanding loans face a risk of default," the official with direct knowledge of the matter said.
A fresh surge in bad debt could hit credit growth and delay India's recovery from the coronavirus pandemic.
"These are unprecedented times and the way it's going we can expect banks to report double the amount of NPAs from what we've seen in earlier quarters," the finance head of a top public sector bank told Reuters.
The official and bankers declined to be named as they were not officially authorized to discuss the matter with media.
India's finance ministry declined to comment, while the Reserve Bank of India and Indian Banks' Association, the main industry body, did not immediately respond to emails seeking comment.
The Indian economy has ground to a standstill amid a 40-day nationwide lockdown to rein in the spread of coronavirus cases.
The lockdown has now been extended by a further two weeks, but the government has begun to ease some restrictions in districts that are relatively unscathed by the virus.
India has so far recorded nearly 40,000 cases of the coronavirus and more than 1,300 deaths from COVID-19, the respiratory disease caused by the coronavirus.
'RIDING THE TIGER'
Bankers fear it is unlikely that the economy will fully open up before June or July, and loans, especially those to small- and medium-sized businesses which constitute nearly 20% of overall credit, may be among the worst affected.
This is because all 10 of India's largest cities fall in high-risk red zones, where restrictions will remain stringent.
A report by Axis Bank said that these red zones, which contribute significantly to India's economy, account for roughly 83% of the overall loans made by its banks as of December.
One of the sources, an executive director of a public sector bank, said that economic growth had been sluggish and risks had been heightened, even ahead of the coronavirus crisis.
"Now we have this Black Swan event which means without any meaningful government stimulus, the economy will be in tatters for several more quarters," he said.
McKinsey & Co last month forecast India's economy could contract by around 20% in the three months through June, if the lockdown was extended to mid-May, and growth in the fiscal year was likely to fall 2% to 3%.
Bankers say the only way to stem the steep rise in bad loans is if the RBI significantly relaxes bad asset recognition rules.
Banks have asked the central bank to allow all loans to be categorized as NPAs only after 180 days, which is double the current 90-day window.
"The lockdown is like riding the tiger, once we get off it we'll be in a difficult position," a senior private sector banker said.
Comments
if you think muslim killed million, then forget about you,....even you grand grand father never breath in this world. muslim are generous but if you provoke they will hit with full power even if he was alone, not like you people coward you attack in number like dogs
hope the US nukes muslim lands. Islam is responsible for killing millions
we never find Iran by supporting palestinians in their difficult times , only instigate groups like Hamas to keep entire area boil ,
watch situation sunni muslims in Iraq, syria , yeman... do US or Isreil responsible ? even US interfered , who is the benefeciary...
In Yeman entire sea route is controled by US navy , even then weapons are supplied to houthis.... who is supplying weapons weather US or Iran by the help of US navy.... !
Warriors of Muslim? Nonsense. they are killing so many muslims in Yemen, they are the one who started to fight the sunnis and killing them, they have killed many in Algeria, Lebonan using thei terrorism.
Read history of the their trait before blindly trusting. their statement now is just a political gimmic. if they are so worried about muslims and so powerful and talking about defending Saudi why did they defend palastine why dint they fight israel? why they just watching so many diying muslims children an women and men in palastine where is their power. what we hear nothing bnut lies from them. they will not do anything their aim is to conqer power. Rafida or Rawafid is their name!
Warriors of Muslim? Nonsense. they are killing so many muslims in Yemen, they are the one who started to fight the sunnis and killing them, they have killed many in Algeria, Lebonan using thei terrorism.
Read history of the their trait before blindly trusting. their statement now is just a political gimmic. if they are so worried about muslims and so powerful and talking about defending Saudi why did they defend palastine why dint they fight israel? why they just watching so many diying muslims children an women and men in palastine where is their power. what we hear nothing bnut lies from them. they will not do anything their aim is to conqer power. Rafida or Rawafid is their name!
salute fo the true worrier of muslim, IRAN
you are asking help with american slaves, sorry they are loyal dogs die for them not for muslim brothers.
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