NEW DELHI: Reserve Bank of India (RBI) Governor Shaktikanta Das met the heads of public and private sector banks via video conferencing on Monday where the lenders have raised concerns about a potential rise in the stress levels in the wake of the second wave of Covid-19 cases.
According to an official who attended the meeting, a few bank chiefs have also sought an extension of the one-time restructuring scheme at least by another six months.
“We fear that banks could see a sharp rise in bad loans, especially from MSMEs, with regional lockdowns being implemented in the states as this time around lenders won’t have the cover of forbearance as the judicial standstill on asset recognition has been removed. We have requested the RBI to extend the scheme (Covid-restructuring),” said a senior banker in the know.
Analysts and rating agencies have said that banks could see bad loans surge by about Rs 1.3 crore with the Supreme Court judgment vacating its interim order on standstill on the classification of assets.
In its report released earlier in the day, S&P Ratings said that the “systemic risk facing banks in India is likely to remain high in the wake of the second wave of Covid-19 cases and a high proportion of weak loans.
It estimates the weak loans are at 11-12 per cent of gross loans.
“We forecast credit losses will fall to 2.2 per cent of total loans in the year ending March, 2022, (FY22) and 1.8 per cent in FY23, after staying elevated at an average of 2.8 per cent in fiscals 2016-2021."
In the meeting, the governor asked banks to remain watchful of the evolving situation and continue taking measures proactively for maintaining their business continuity.
Das also stressed on the continued need for banks to raise adequate capital and ensure credit flows to the stressed sectors.