Indian banks would witness the jolt of Covid pandemic on their growth for the next few years and they will have to adapt to different ways to tackle businesses going ahead, a Dun & Bradstreet report said. The real crash of the pandemic would only be seen after the moratorium gets over, the report said.
The worldwide recession and the expansionary monetary policies adopted by countries globally is expected to have an effect in the financial sector with the banking sector likely to stay besotted over the coming years, the report mentioned.
Most banks are also set to realize the real effect of the Covid pandemic when the prohibition expires in December. Many banks have questioned RBI to continue with the moratorium for the next quarter as per industry trackers. Though for now, the central bank does not seem to have made any call on that yet.
Loan losses are expected to be realized by the banks after the ban expires. As RBI reports around 50% of total depositors of scheduled commercial banks’ have taken the RBI’s loan moratorium which amounts to 50% of total outstanding loans as of 30th April. By the end of August when the moratorium period ends, non-food credit around was Rs. 102 tn. Inferring 50% of the loans go under moratorium and 10% from those to loans default. It would add to around Rs 5 trillion to the already existing bad loans,” the report said.
Most of the banks will have many challenges in the coming years as banks would require to build and learn new skills to adapt to an ever-changing business environment, the report said.
Also, financial negotiators will have taken on a reappraisal of their business models and scarcity of enough information hamper the credit scores/credit rating activities to stop estimating probable default cases, the report said.