Rating agency Crisil in its report on Covid-19 impact has said that gross non-performing assets (NPAs) of lending institutions are set to rise 150-200 basis-points (bps) this fiscal due to higher slippage and lower recovery. There will be no major resolution via the National Company Law Tribunal (NCLT) this fiscal, the report further said.
Crisil expects GNPAs for the financial year 2020 to remain at 9.5%. Considering the Covid-19 impact, Crisil has projected GNPAs in the range of 11-11.5% for the financial year 2021.
Prasad Koparkar, senior director, Crisil research, said, “We certainly expect 11-11.5% as base case scenario, which may have material upside.” The stress will be across the board in corporate book and for a change, even in the retail book, Koparkar added. Crisil believes loan repayment capacity is going to decline in the retail segment due to the Covid-19 impact.
According to Crisil, the ongoing economic disruption due to Covid-19 is likely to result in a permanent loss of 4% of gross domestic product (GDP) for India. This means as the time goes by, there will be a certain amount of economic activity that will not be recovered and that is estimated to be 4% of GDP. In the base case scenario, Crisil expects the GDP growth of 1.8% for the fiscal 2021.
Dharmakirti Joshi, chief economist at Crisil, said this is worse than the impact of the global financial crisis of 2008. Crisil also provided caveats that most assumption for the base case scenario have risk titled towards the downside. In other words, things are more likely to go down from the base scenario.
Crisil also pointed out that for any such recovery to happen, the fiscal response from the government has to be much more significant than what is right now.