India 2020 symptoms India

Banks will take 12-18 months to show covid symptoms

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₹1 trillion of debt is estimated to have become non-performing. This is just 16% more than the currently recognized NPA level.

Given the economic shock, this warrants a sigh of relief, even if only temporary. Further, it is estimated that less than 2%-3% of borrowers had requested an OTR as of 31 December 2020.

While these signs are encouraging, it may be too early to celebrate. An exploration of the possible reasons for today’s less-than-expected stress levels may provide clues to how India’s NPA trajectory will play out.First, consider pre-covid restructuring in the micro, small and medium enterprise (MSME) sector.

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