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Asset quality pressure may last 2 yrs, spike banks' bad loans by 6%: Fitch

Rating agency says moratorium extension, easing of working capital loan limits

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There is a risk that banks may now extend credit to even structurally weak borrowers with dimmer recovery prospects, due to a one-year moratorium on registering fresh insolvencies amid weaker future incomes

Abhijit Lele Mumbai
Rating agency Fitch said today that Indian Banks will see significant asset-quality challenges for at least the next two years despite regulatory measures. The impact on impaired loan ratios could be anywhere between two to six per cent, depending on the severity of stress and banks' individual risk exposures.

The latest set of measures by the Reserve Bank of India include bank include an extension of the 90-day moratorium on recognition of impaired loans to 180 days. This was in addition to several relaxations in bank lending limits, including allowing banks to fund interest on working-capital loans.

Fitch said in its report

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First Published: May 28 2020 | 3:09 PM IST

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