India Ratings and Research (Ind-Ra), an Indian credit standing company, has mentioned that heightened stress in retail and micro, small and medium enterprises (MSMEs) can result in the banking sector’s inflexion level.

The company estimated its FY22 credit score development to be unchanged at 8.9 per cent for FY22. “Ind-Ra has kept its FY22 credit growth estimates unchanged at 8.9 per cent for FY22, supported by a pick-up in economic activity post 1QFY22, the higher government of India (GoI) spending especially on infrastructure, and a revival in demand for retail loans. The agency estimates GNPA at 8.6 per cent and stressed assets at 10.3 per cent for FY22. The agency expects provisioning cost to increase to 1.9 per cent from its earlier estimate of 1.5 per cent for FY22,” Ind-Ra mentioned in an official assertion. 

The company additionally mentioned that upward motion within the yield curve can take down the profitability of banks.

Talking concerning the MSME sector, it mentioned, “The micro, small and medium enterprises (MSME) sector has been under pressure with demonetization, the introduction of GST and RERA, slowing down of large corporates and now COVID-19. However, the GoI has supported the segment by offering liquidity under the Emergency Credit Line Guarantee Scheme (ECLGS) and restructuring. The agency expects that beginning 3QFY22, a portion of such advances would start exiting moratoriums a part of which could slip. Ind-Ra expects GNPAs to increase to 13.1 per cent by end-FY22 from 9.9 per cent in FY21. Stressed assets similarly would increase to 15.6 per cent from 11.7 per cent.”

The company additionally mentioned that the agriculture sector has witnessed restricted COVID-19 impression. The company mentioned that with two consecutive regular monsoons (FY20 and FY21) and comparatively regular actions throughout the pandemic, the agriculture phase has not proven any important incremental stress to date. The agriculture phase was comparatively unscathed by the pandemic within the first covid wave however has seen the upper impression within the second wave. However, Ind-Ra believes that is nonetheless decrease than the impression seen in different sectors, and monsoons stay the important thing monitorable for the sector.