You are here: Home » Finance » News » Banks
Business Standard

Govt support for bank borrowers softened rise in bad loans: Moody's

The support has averted a sharp asset quality deterioration, Moody's Investors Service said

Moody's Investor Service | Banking sector | Bad loans

Press Trust of India  |  New Delhi 

banks, npa, loans, recapitalisation, bad loans, loan restructuring, debt
Representational image of bad loans

The government's support measures for bank borrowers have softened growth in non-performing loans, averting the risk of a sharp asset quality deterioration, Moody's Investors Service said on Friday.

Moody's VP and Senior Credit Officer Alka Anbarasu said ample domestic liquidity, loose monetary policy, moratoriums on loan repayments and government-guaranteed loans to small businesses have supported Indian banks' asset quality.

As a result, restructured loans have not increased as much as Moody's expected at the onset of the pandemic.

"The Indian government's support measures for bank borrowers have softened growth in non-performing loans (NPLs), averting the risk of a sharp deterioration in asset quality," Moody's Investors Service said in a statement.

The rating agency said asset performance at India's largest private sector HDFC Bank, ICICI Bank, Axis Bank, IndusInd Bank and IDBI Bank was better-than-expected in the nine months to December 2020.

On the other hand, Yes Bank faces greater asset risks than its peers, although its capitalisation, liquidity and funding have improved.

A recovery in India's economy in 2021 will support borrowers' debt-servicing capability after the support measures expire. As a result, a sharp deterioration in asset quality is now less likely than Moody's previously anticipated.

"Proactive efforts to raise fresh capital, improving profitability and increased loan loss reserves enable Indian to absorb unexpected losses, which will support their credit profiles," Anbarasu said.

Moody's said strong deposit growth further enhances liquidity and helps reduce funding costs.

"Deposit growth outpaced loans at most through the third quarter of fiscal 2021 as consumers and businesses cut spending amid economic uncertainty, bolstering already robust liquidity at these banks," it added.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Fri, February 05 2021. 17:46 IST