The asset quality of Indian lenders, especially the restructured loan book, is at risk from a possible third wave of COVID-19, ICRA Ratings said in a report.
Anil Gupta, Vice President, Financial Sector Ratings, ICRA Ratings said, “With the increasing proliferation of new variants Omicron, there is a high probability of occurrence of a third wave.” “As banks restructure most of these loans with a moratorium of up to 12 months, this book is likely to come out of the moratorium from Q4 FY2022 and Q1 FY2023,” he said.
“Therefore, the third wave poses a higher risk to the performance of borrowers who were impacted by the previous waves and therefore poses a risk to the improving trend in asset quality, profitability and solvency,” he said.
Mr Gupta said that banks had implemented 83% of the total requests (76% for public sector banks and 86% for private banks) under COVID 2.0, taking the total to 1.2 as of September 30, 2021. trillion debt restructured.
As restructuring requests may be implemented by December 31, 2021, the incremental restructuring could increase by 15-20 basis points from current levels, Mr. Gupta said.
demand for restructuring
“The third wave may revive demand for restructuring of loans, including loans that were already restructured,” he said.
“In such a case, visibility on the performance of the restructured loan book, which was earlier expected in FY2023, can now be expected in FY2024 as the moratorium on existing restructured loans may be extended,” Mr. Gupta said.
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