Retail and SME loans set for litmus test in 2021 as stress levels may rise

Little leeway on pricing and asset quality at a tricky level could places both segments in a tight spot

The Reserve Bank of India’s Financial Stability Report (FSR), published on Monday, reiterated higher-than-anticipated stress formation. But here’s the tricky part. While the report is cautious across categories of lending – wholesale, micro, small and medium enterprises (MSMEs) and consumer credit and the outlook for wholesale or corporate loans is a tad better than expected, stress could be building up in the retail or consumer lending space and MSME segment as indicated in the table. Retail and MSME loans together account for 45–60 per cent of the total loan portfolio for banks. The FSR acknowledges that with the regulatory reliefs