Third wave of COVID-19 to pose risk to banks asset quality, profitability and solvency: ICRA
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Domestic rating agency ICRA in its latest report has said that the threat of third wave of COVID-19 poses a high risk to the performance of the borrowers that were impacted by the previous waves and hence poses a risk to the improving trend of banks asset quality, profitability and solvency.
Rating agency also sees a 15-20-basis point uptick in restructuring requests from the borrowers. It said that banks restructured most of the loans with a moratorium of up to 12 months. Hence, the restructured book is likely to start exiting the moratorium from Q4 FY2022 and Q1 FY2023. With incremental restructuring under Covid 2.0 scheme, it said the overall standard restructured loan book for banks increased to 2.9 per cent of standard advances as on September 30, 2021, (two per cent as on June 30, 2021). Most of this restructuring includes borrowers impacted by Covid 1.0 and 2.0.
The report further said the restructuring under Covid 1.0 scheme is estimated at 34 per cent (or Rs 1 lakh crore) of the total standard restructured loan book of Rs 2.85 lakh crore for banks as on September 30, 2021. And, under Covid 2.0, it is estimated to be at 42 per cent or Rs 1.2 lakh crore. The balance comprised micro, small and medium enterprises (MSMEs) and other restructuring. The report added that banks have implemented about 83 per cent of the total requests received under Covid 2.0, leading to an overall restructuring of Rs 1.2 lakh crore of loans till September 30, 2021.
