Stress loans in the Indian financial system increased by at least Rs 4.60 lakh crores during the Covid era, rising to 12.6 percent of total loans in June 2021 from 8.2 percent in March 2020, according to Nomura Securities.
Gross NPAs and restructured assets across banks and NBFCs grew to Rs 13.2 lakh crore in June 2021 from Rs 8.6 lakh crore in March 2020, owing to an increase of Rs 3.7 lakh crore in past-due loans and Rs 2.4 lakh crore in restructured assets after accounting for recoveries and write-offs.
Nomura analysts Nilanjan Karfa, Amit Nanavati, and Tanuj Kyal stated that.”It would not be too out of place, in our view, to suggest that the entire increase in stressed asset pool is on the Mar’20 asset base and stress contribution from incremental lending in FY21 would be rather limited,”
When banks and NBFCs are separated, total stress increased to 13.3 percent in June 2021 compared to 8.9 percent in March 2020 for banks, and to 6.7 percent in June 2021 compared to 3.1 percent in March 2020 for NBFCs, including loans given through the government-sponsored Emergency Credit Line Guarantee Scheme (ECLGS).
Nomura estimates that enders have created an additional exposure to the ECLGS program of around Rs 2.5 lakh crore, of which Rs 1.7 lakh crore has been accounted for so far. The banking sector’s exposure to the ECLGS might be five times the total amount disbursed, given that the scheme’s disbursement caps have already been raised three times.
As of June 2021, the Life Insurance Corporation of India (LIC)-controlled IDBI Bank is anticipated to have the highest stock of stressed loans, accounting for 36.7 percent, followed by the Central Bank of India with 27.2 percent. HDFC Bank, a private sector bank, has the smallest strained pool at 6%, just ahead of Axis Bank, which has 6.8% of stressed loans, including restructured loans. The two private sector banks with a stressed loan stock of 20% or more are Yes Bank and Bandhan Bank.
State-owned banks have restructured a bigger percentage of loans than in prior restructuring rounds under the COVID one-time restructuring scheme 1 (OTR #1), OTR #2, corporate debt restructuring scheme (CDR), and RBI MSME restructuring scheme.
“Between March 20 and June 21, state-owned banks accounted for 78 percent of incremental restructuring across all schemes, with private sector banks accounting for the rest. Similarly, state-owned banks account for 72 percent of state-owned banks in OTR #1, where the plan is completely executed, 81 percent in OTR #1 and OTR #2, and 81 percent in MSME s “It’s 83 percent heme,” Nomura stated.
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