Ratings agency Fitch warned in a report on Thursday that banks may face major challenges in recovering loan installments by lending under the government’s stimulus package of around Rs 21 lakh crore. Due to this, their trapped debt or NPA ratio could increase to six percent during the next two years.

Fitch Ratings said that banks’ NPA ratio could be between two and six percent due to the pressure of forced lending. This will depend on the severity of the banks’ situation and the risk appetite of the banks and high regulatory provisions. The agency, however, has not given separate estimates for the NPAs of public sector banks and private sector banks.

The stimulus package announced by the government included a range of relief in bank loans and a 90-day increase in a moratorium. The Fitch report said these measures would place a heavy burden, especially on public sector banks, whose balance sheets are already very weak.
According to the report, both demand and manufacturing are in poor condition until the rising cases of coronavirus infection are brought under control. Tensions are rising in all sectors, but MSMEs and retail will be at the highest risk

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