As for non-corporate loans, the agency expects to undergo restructuring, which would otherwise have slipped, at least Rs 2.1 lakh crore, which represents 1.9 percent of bank credit.
According to India Ratings and Research, banks can restructure loans worth Rs 8.4 lakh crore, or about 7.7 percent of total bank credit in the corporate and non-corporate segments at the end of March 2020 under the current framework. The value will be higher if restructuring reaches 1.9 percent of the overall bank credit in non-corporate segments.
India Ratings and Research estimated that, in the absence of restructuring, nearly 60 percent of Rs 8.4 lakh crore was already susceptible to fall into the post-lockdown NPA (non-performing assets) category, the rating agency also said that the largest share of restructured accounts could come from infrastructure, power, and construction.
According to India Ratings and Research agency, the quantity of restructuring from the corporate sector in FY21 could range from 3 percent to 5.8 percent of the banking credit – amounting to Rs 3.3-6.3 lakh crore. Also, stressed assets that might not fall in the short term should be restructured as the stress in these accounts would have been exacerbated by COVID. The agency also added that the department reported nearly 53 percent of this pool is at a high risk of restructuring or slippage based on an account-level analysis. The remaining 47 percent are at moderate restructuring risk, and advances on these accounts will depend on Covid ‘s progress.
India rating said that although a high proportion of the debt from the real estate, airlines, hotels, and other consumer discretionary sectors is likely to be restructured, infrastructure, power, and construction will make the largest contribution. As for non-corporate loans, the organization expects to undergo restructuring, which would otherwise have slipped, at least Rs 2.1 lakh crore, which represents 1.9 percent of bank credit.
The India rating agency expects that, the provisioning requirement for the restructured pool in FY21 to fall by approximately 10 percent from earlier expectations on loans that might have turned bad. As the tenor of restructured loans can be extended for a maximum of two years, the accounting-related effect of credit costs in FY21 and FY22 may be benign. It has reduced its supply forecasts for FY21 from 2.8 percent to 2.3 percent for the banking sector. This predicts a credit cost ratio of 2.6 percent for public-sector banks. This can be 1.8 percent for private banks.
