InvestorQ : Has ICRA warned of a sharp deterioration in NPAs post the COVID-19 pandemic?
diksha shah made post

Has ICRA warned of a sharp deterioration in NPAs post the COVID-19 pandemic?

Answer
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Aashna Tripathi answered.
3 months ago


The rating agency ICRA, in a report, has warned that the gross NPAs of the banking system could worsen from 8.6% in March 2020 to 11.6% in March 2021. This sharp 300 basis points spike in gross NPAs is likely to be an outcome of COVID-19 related lockdown and the lag effect. According to ICRA, the real stress on banks would be visible only after August 31 this year when the moratorium gets over. This would also imply that banks would need additional recapitalization of Rs.70,000 crore to tackle the combined impact of higher NPAs and slowdown in growth. This is not just limited to PSU banks but private banks could also feel the heat of defaults on consumer loans. Private Banks may likely see their average ROE levels fall from 12% down to 5.5%. However, a clear picture will only emerge after the moratorium is lifted since currently 39% of the loans are under moratorium and the stress will only be known after that.