Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us    

| More

Loan Moratorium & Impact on Banks & NBFCs - Acuité Ratings & Research

Posted On: 2020-08-01 22:01:02

Sankar Chakraborti, Group CEO of Acuité Ratings & Research on Loan Moratorium with its Impact on Banks and NBFCs:

RBI's timely loan moratorium announcement has provided a significant relief to all those borrowers whose cash flows were severely disrupted due to the virtual cessation of economic activities on the back of a stringent nation-wide COVID lockdown from last week of March 2020. There is clearly no reliable data available on the moratorium burden faced by both banks and NBFCs. The estimates worked out by Acuité Ratings and Research suggest that it was around 42% for public sector banks and 30% for private sector banks in the first phase on an aggregate portfolio exposure basis. On the other hand, it was over 65% for the NBFC sector which mostly lends to self-employed borrowers and small enterprises.

However, there has been a steady decline in the proportion of borrowers under moratorium in the second phase (June - August 2020) primarily due to resumption of business activities, with easing of lockdown, borrower realisation of the accrued interest burden and also the efforts made by banks and NBFCs to pull out better customers from moratorium. Our estimates are that in the second phase the moratorium figures are roughly 30% for public and 20% for private sector banks, translating to an weighted average of 25% for the banking system as against 35% in the first phase. The reduction in the moratorium burden has been higher for the NBFC sector from the earlier 65% to around 45%. Specifically, for the retail borrowers in banks, the share of moratorium loans has come down from 60% in M 1.0 to 45% in M 2.0. As regards corporate borrowers, it has roughly declined from 25.0% to 17.5% for the banking sector as a whole. While the asset classification for the moratorium loans remain unchanged, the banks and NBFCs have started to make contingency provisions for such loans since it is likely that a certain proportion of these loans will turn delinquent and may need to be categorised as NPA in the near future. The provisions in each bank depend on their assessment of the risks.

Acuité believes that another extension of the moratorium may hurt the lenders for the following reasons; one, the clients with improving cash flows may continue to avail the moratorium and further the section of borrowers who have already started to pay may again seek moratorium, thereby impacting the expected improvement in collections. Secondly, a long moratorium beyond six months can impact credit behaviour of borrowers and increase the risks of delinquencies post resumption of scheduled payments; another risk of providing a continuous moratorium is the likelihood of diversion of surplus funds which otherwise can be used for debt repayment.

In the opinion of Acuité, a one-time restructuring is a more prudent option at this stage when the economy is a partial recovery mode rather than a blanket moratorium applicable to all.

Source: Equity Bulls

Click here to send ur comments or to

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only., its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.

Other Headlines:

HeidelbergCement India - Play on better priced Central India; initiate with BUY - ICICI Securities

Healthcare - Diagnostics: Multiple tailwinds likely to emerge - ICICI Securities

Mazagon Dock Shipbuilders Ltd - IPO Review - ICICI Securities

Persistent Systems - 28th September 2020 - Angel Broking

Canara Bank - 28th September 2020 - Angel Broking

Subscribe to UTI Asset Management Company Limited - IPO Note - Angel Broking

Multiplex Sector - Mr. Jyoti Roy - DVP - Equity Strategist, Angel Broking Ltd

Sale of Sequent stake to Strides Pharma - Angel Broking

Subscribe to Mazagon Dock Shipbuilders Ltd - IPO Note - Angel Broking

JSW Energy - First big renewable step - ICICI Securities

V-MART Retail - Best play in value fashion segment; initiating with BUY - ICICI Securities

Gas sector - New winners and losers likely on policy changes in gas sector - ICICI Securities

Mazagon Dock Shipbuilders Limited - IPO Note - Geojit

UTI Asset Management Company Limited - IPO Note - Geojit

Preview on RBI Monetary Policy - Oct 2020 - Shanti Ekambaram

Rollover Report for September 2020 - October 2020: Angel Broking

Covid Recovery Pulse - Sep 25, 2020 - ICICI Securities

Quick Comment - Suven Pharmaceuticals - ICICI Securities

Derivatives Strategy - Sep 25, 2020 - Positional Option - ICICI Securities

Gladiator Stocks - Ramco Cement - ICICI Securities

IPO Review - UTI Asset Management Company - ICICI Securities

Stock of the Day - Zensar Technologies - Sep 25, 2020 - Angel Broking

Accenture Q4FY2020 Result - Angel Broking

Granules India receives ANDA approval - Angel Broking

Zydus Cadila receives US FDA approval - Angel Broking

Cipla - ANDA approval - Mr. Yash Gupta - Equity Research Associate, Angel Broking Ltd

Mindspace REIT - Mr. Yash Gupta - Equity Research Associate, Angel Broking Ltd

UTI AMC - IPO - Mr. Jaikishan Parmar - Sr. Equity Research Analyst, Angel Broking Ltd

Balkrishna Industries - Growth momentum continues - ICICI Securities

Rollover Analysis (September 25): Nifty starts October series with low OI amid high volatility

Derivatives View (September 25): Sell Bank Nifty in range of 20650-20750 - ICICI Securities

Rollover Analysis - Sept 20: Selling climax on expiry as markets crumble - YES Securities

Zydus Wellness - Leadership in niche categories; initiate at BUY - ICICI Securities

Power - Setting the stage - ICICI Securities

Company Update - Elgi Equipments - ICICI Securities

Nano Nivesh - The Anup Engineering - ICICI Securities

RBI OMO announcement of Rs. 10000 crore - Angel Broking

TCS deal win - Sep 24, 2020 - Angel Broking

View on Pre-Monetary Policy by Upasna Bhardwaj, Senior Economist at Kotak Mahindra Bank

US FDA approval to Zydus Cadila - Angel Broking

HDFC Securities Institutional Research Desk: Cement Sector Thematic - Spotting the sweet spot

Bharat Forge - Expectation hurdle remains steep - ICICI Securities


Mutual Fund Review - September, 2020 - ICICI Securities

UTI AMC announces IPO date - Angel Broking

Asian Paints - Mr. Amarjeet Maurya - AVP - Mid Caps, Angel Broking Ltd

Britannia Industries - Mr. Amarjeet Maurya - AVP - Mid Caps, Angel Broking Ltd

Hexaware Technologies (Not Rated): Hexaware accepts 475/share as final delisting price - ICICI Securities

CAMS IPO - Day 2 Subscription - Angel Boking

Chemcon Speciality Chemicals - IPO subscribed 12.62 times on second day - Angel Broking

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2019