Slippages may jump to Rs 5.5 trillion, says India Ratings.

by mehekkaoberoi
  • Stress emerging from the severe economic shock caused by steps to contain the pandemic may drive total slippages to Rs 5.5 trillion in FY21.
  • The corporate side may see slippages of Rs 3.4 trillion, and non-corporate side — retail, farming and MSMEs — may account for Rs 2.1 trillion, according to India Ratings.
  • Banks faced elevated provision pressure (amount set aside for stressed loans) resulting from the corporate stress cycle, from FY16-FY20. For this, they had made substantial provisions and were moving towards a moderated credit cost cycle.
  • However, the Covid-related measures are likely to result in another cycle of stress. Additionally, the pressure on non-corporate segments, which were already visible before the outbreak, is likely to intensify.
  • Capital requirement under the benign provision regime for PSBs would range from Rs 30,000-55,000 crore
  •  If the accelerated provisioning regime is reinstated, the capital requirement could further increase up to Rs 40,000 crore to maintain Tier-1 capital of 10 per cent. This is 50 bps higher than the regulatory requirement that comes into action after September 2020.
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