The systemic risk for banks is high due to the second wave of COVID-19, said Deepali Seth Chhabria, associate director of S&P Global Ratings, on Thursday.
Speaking in an interview with CNBC-TV18, she said, “We believe that the system risk facing the banks is high because of the second wave of COVID-19 infection and for Indian banks especially so because they still have a high proportion of weak loans.”
“However, the Indian economy has recovered over the last few months but the COVID risk still remains high. We have seen some targeted lockdowns that have happened and there could be more that could come in,” said Chhabria.
Talking about NPAs, she said, “Currently we are estimating that the system weak loans are at about 11-12 percent of gross loans and this also includes estimated 3 percent of restructured loans. This is somewhat lower than what we were expecting last year. At that time we were estimating 14-15 percent gross loans as weak loans.”
“However, it’s fair to say that the public sector undertaking (PSUs) will have a higher proportion of weak loans as compared to the private sector banks,” said Chhabria.
According to her, the control of COVID-19 spread remains the key monitorable for the economy. “The control of COVID-19 risk remains the key risk for the economy. So that’s one aspect that we are watching. We believe that the speed of India’s vaccination rollout will be vital to India’s recovery and key to normalising demand,” said Chhabria.
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