Covid to impair banks’ performance: S&P

New Delhi, June 30

S&P Global Ratings on Wednesday said Indian banks face a systemic risk as the second Covid wave will impair the performance of financial institutions in the April-September period.

Stating that economic recovery remains highly vulnerable to setbacks due to Covid, particularly if fresh outbreaks trigger new lockdowns, S&P said the banking sector’s weak loans will likely remain elevated at 11-12% of gross loans in the next 12 to 18 months.

“The second wave has front-ended weakness in asset quality,” said S&P Global Ratings credit analyst Deepali Seth Chhabria. “Financial institutions face a strained first half amid weak collections and poor disbursements.” Indian banks face systemic risk as the country sorts through the aftermath of the Covid second wave. Lenders struggled with a high level of weak loans well before the pandemic struck and clearly, conditions have deteriorated, S&P said.

The government has announced support for the microfinance and tourism sectors that should help struggling borrowers. This support comes on top of the recently extended loan guarantees to SMEs. — PTI