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COVID surge and banks: Asset quality to deteriorate; MSMEs more resilient, say experts

Updated : April 13, 2021 12:36:24 IST

Private and public banking heads yesterday (April 12) met the Reserve Bank of India and raised concerns about a potential rise in the stress levels in the wake of the second wave of COVID-19 infections, CNBC-TV18 has learnt.

In anticipation of this unforeseen rise in bad loans, several bank chiefs also asked RBI to consider extending the one-time restructuring scheme, according to three people in the know.

In an interview to CNBC-TV18, Saloni Narayanan, deputy managing director (DMD) of retail business at State Bank of India (SBI) and Krishnan Sitaraman, senior director of CRISIL Ratings discussed at length these troubling times and the fear it created in terms of the impact on small and medium enterprises (SMEs), small shops, transport operators.

Narayanan said, “We have the localized lockdowns but the nationwide lockdown that was there last year, I am very sure that that’s not going to happen this time. Therefore, the micro, small and medium enterprises (MSMEs) are kind of little more resilient and prepared so the impact should not be that much.”

“We have asked for some dispensation for MSMEs considering the vulnerability of the segment and 6 months is something that we are looking at, if Reserve Bank of India (RBI) agrees to that because restructuring window closed on March 31, 2020, and till now we have restructured around 59,000 accounts amounting to Rs 3,000 crore,” she said.

Meanwhile, Sitaraman said, “The entire financial sector whether its banks, NBFCs, we do expect asset quality to deteriorate in the current fiscal.”

“MSMEs are more challenged today as against the larger corporate which over a period of deleveraging and consolidation look more resilient now. We also see NPAs going up in the retail segment because there have been job losses, there have been salary cuts and with the pandemic rearing its head again, asset quality would be a key monitorable but important is the spread, intensity and duration of these lockdowns that we are seeing,” he said.

For the entire discussion, watch the video
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