An increase in COVID-19 cases across the country and restrictions to prevent further spread could once again increase bad debts, economics experts fear. Loans from banks to microfinance institutions, small businesses, and unsecured loans like credit cards and personal loans are the most vulnerable and likely to turn into non-performing assets (NPAs).
In a note to clients on December 30, Emkay Global Financial Services said: âSMEs / MFIs remain the most vulnerable segments, and therefore banks with relatively higher exposure to these segments like Bandhan Bank, Ujjivan Small Finance Bank , IndusInd Bank, Axis Bank, RBL Bank, City Union Bank and DCB Bank could be exposed to relatively higher asset quality risk. “
Recognizing the likelihood of an increase in NPAs, public sector banks are exercising the utmost caution when distributing loans. The portfolios of loan seekers are thoroughly assessed to ensure their repayment capacity.
However, there is a silver lining. This time around, more people are vaccinated, and as a result, most of those who catch COVID are recovering without needing hospitalization. Analysts believe state governments won’t opt ââfor a strict lockdown if hospitals aren’t overwhelmed.
(Edited by : Thomas abraham)