Indian banks face a systematic risk due to the second COVID wave that will impair the performance of all the financial institutions during the April-September period, said the S&P Global Ratings on Wednesday.
The economic recovery is highly vulnerable to shortcomings due to COVID, especially if the new outbreaks trigger new lockdowns. They also added that the weak loans of the banking sector will remain high between 11-12 per cent of gross loans in the coming 12 to 18 months.
As the country deals with the second wave of COVID, Indian banks face systematic risk. Many lenders have gone through high levels of weak loans even before the pandemic had hit and clearly, after that, the conditions have only worsened. To help the struggling borrowers, the government has announced the microfinance and tourism sector.
The second wave is expected to hit the performance of the Indian financial institutions during the first half of the fiscal year 2022. The Indian economy has been trying to recover since mid-June, said a US-based rating agency, following a series of lockdowns in April and May.
The next six months should be called based on the effectiveness of the policies to manage the long-simmering bank-sector strains, said the S&P Global rating credit analyst Geeta Chugh.