INSUBCONTINENT EXCLUSIVE:
Stressed corporate assets of about Rs 3.5 lakh crore are unrecognised by lenders.Banks may have to provide an additional up to Rs 40,000
crore ($5.59 billion) towards loans, which could potentially turn sour between October 2018 and September 2020, according to India Ratings
Research, the domestic arm of Fitch Ratings.Within stressed corporate assets of Rs 13.5 lakh crore to 14 lakh crore in banks, about Rs 3.5
lakh crore are unrecognised by lenders
This highlighted the fact that these loans are still being serviced by borrowers, and categorised as "standard" on banks' books, said India
Ratings Research, while publishing a report on banking sector outlook."In worst-case scenario, about half of the unrecognised stressed
assets can slip into NPAs (non performing assets) in two years from October 2018," said Jindal Haria, associate director of banking and
financial institutions, India Ratings Research.The banking sector has been under massive stress in the last few years as lenders have
struggled with about $150 billion of bad loans that have constrained their lending ability, and in turn, hit economic revival."The
probability of such accounts with interest coverage ratio of less than 1.5 times of becoming NPA is high, but technically they are still
standard assets on banks' books," said Mr Haria, in reference to companies' debt-servicing ability.Despite the new provisioning, Mr Haria
remained confident that stress recognition around corporate accounts has almost peaked and the banking cycle will rebound."Many public
sector banks will materially turn to profitability in 2019/20 and lending will improve," Mr Haria added.That could be a relief for Prime
Minister Narendra Modi, who is keen to boost credit availability to businesses, as he aims to please companies and rural voters ahead of
general elections due in May.Even as PM Modi aims to woo voters, the Reserve Bank of India will announce its monetary policy on Thursday
where it is likely to shift its stance to "neutral" from "calibrated tightening", and move closer to a rate cut by April as inflation stays
below the central bank's 4 per cent target.
