Second wave of COVID infections increased bank’s asset quality risks: Moody’s
2 min readInvestor Moody services on Thursday said the second wave of Covid infection has increased the risk of assets for Indian banks, but severe setbacks are impossible.
It is said that the second wave of Coronavirus infection in India has worsened the pressure between individuals and small businesses hit by the most difficult outbreak. However, a number of factors will prevent a sharp increase in a problematic loan, and the bank has enough buffer to absorb anticipated loan losses.
The country’s economic recovery, tightening of loan guarantee criteria and sustainable government support will prevent a sharp surge in loans, he said.
“Severe setback The quality of bank assets is not possible, despite the increase in a decline in new loans, especially between individuals and small businesses that are hardest hit by the virus outbreak.
“This is because government initiatives such as emergency loans related guarantee scheme (ECLG) have been effective in providing immediate liquidity for businesses,” said Vice President Moody and Senior Credit Officer Alka Anbarasu.
In addition, accommodating interest rates and loan restructuring schemes will continue to mitigate the risk of assets, so that the revival of the Coronavirus will delay but it does not thwart an increase in the bank balance that has begun before the pandemic.
The initial expectation of Moody is that new non-performance loans formed (NPL) in public sector banks will increase by almost 50 percent to around 1.5 percent of gross loans every year in the next two years.
However, the Bank’s average NPL ratio will remain stable, driven by NPL resolution inheritance and acceleration of credit growth, Moody’s added.
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