The absence of a common benchmark for lenders for reporting loans under moratorium has led to mismatches between data in financial stability report published by the Reserve Bank of India (RBI) and reported data of individual banks, India Ratings and Research (Ind-Ra) has said.
The financial stability report states that nearly 50 per cent of system loans by value in April were under moratorium. Within banks, public sector banks had 67.9 per cent of their loans by value under moratorium followed by private banks at 31.1 per cent while non-banking financial institutions had 49 per cent of their loans under moratorium.
However, the bank-wise collation of data especially for public sector units does not seem to be adding up to the reported data of financial stability report. The difference is wider for public sector banks, said Ind-Ra.
This could be attributed to variance in interpretation. For example, one such interpretation could be moratorium offered versus ultimately availed and moratorium offered to customers. But they still paying instalments and the number of instalments paid would have played a role in the variations.
While banks have mostly reported a sharp quarter-on-quarter drop in the loan portfolio under moratorium at June-end in their Q1 FY21 results, the comparability and thus usefulness of the same has been constricted.
"The absence of a standard benchmark reduces transparency and gives rise to speculation, leading to biases and judgement affecting investment choices or credit decisions rather than the choice being backed by hard data," said Ind-Ra.
"The importance of transparency cannot be overstated especially in the current period where several banks are planning to raise equity and tier-one capital."
With the prevailing Covid-19 situation, the impact of government and RBI's measures to cushion the blow and provide support to the economy is still uncertain. As such, a full assessment of the damage to the asset quality of lenders remains a bit uncertain.
Ind-Ra had opined that the corporate stress cycle had largely played out over FY16 to FY20 with a large part of the stressed pool slipping into non-performing assets (NPAs).
After that, banks were vying to increase the provision coverage against these NPAs. However, the Covid-19 aftermath is likely to result in another cycle of stress and pressure, especially on the non-corporate segments, which was already visible pre-Covid-19 and is likely to intensify.
The RBI estimates that stress tests indicate that the gross NPA ratio of all scheduled commercial banks could increase to 12.5 per cent by March 2021 from 8.5 per cent in March 2020 under the baseline scenario. If the macroeconomic environment worsens, the ratio may escalate to 14.7 per cent.
Ind-Ra said the Covid-19 led lockdown may drive total slippages of up to Rs 5.5 lakh crore (5.7 per cent) in Ind-Ra's post Covid-19 stress case.
( With inputs from ANI )