Good news for the banking sector! India ratings improve outlook to negative for FY 2021-22

Mumbai. India Ratings & Research (India Ratings & Research) has improved the outlook of the Indian Banking Sector for the financial year 2021-22 from Stable Outlook to Negative. Also, the rating agency says that the pressure on Indian banks in the retail loan segment may increase in the coming times. IRR has raised the credit growth estimate for the financial year 2021 from 1.8 per cent to 6.9 per cent. At the same time, it has been reduced to 8.9 percent for the financial year 2021-22.

The agency has kept a stable outlook for public and private banks
The rating agency has stabilized the public sector banks’ landscape (PSBs Outlook) from negative. At the same time, the outlook for private sector banks has been retained in the stable category as before. According to the agency, gross non-performing assets (GNP + Restructured Loans) in the banking system can reach 30 percent. It has also said that in the second half of the financial year 2020-21, the retail loan segment can register a growth of up to 1.7 times. For public sector banks, stressed retail assets can reach 2.9 per cent during FY 2021-22, up from 2.1 per cent in the current financial year.

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According to India Ratings, stressed retail assets for private banks can grow to 4.3 per cent during FY 2021-22, up from 1.2 per cent in the current financial year. Jindal Hariya, Director (Financial Institutions) of the agency said that in the last 9 months, banks got an opportunity to increase the provision for their old stressed assets. These pressurized assets preceded the Corona epidemic. We estimate that the provision on these NPAs will increase to 75 to 80 percent by the end of the current financial year. This will help the banks to cope with the pressure caused by Kovid-19.