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PSB NPAs likely to rise 2-4% points: Report
State-owned banks' non-performing loans are likely to rise by 2-4 percentage points, which will put up to $15 billion recapitalisation pressure on the government in FY21, a foreign brokerage firm said on Tuesday.
Mumbai: State-owned banks' non-performing loans are likely to rise by 2-4 percentage points, which will put up to $15 billion recapitalisation pressure on the government in FY21, a foreign brokerage firm said on Tuesday.
The consolidated fiscal deficit target is likely to overrun by 2 percentage points due to stimulus spends, lower tax receipts and dip in divestments, and will have to look for different ways of raising resources for recapitalisation, analysts at Bank of America said. The government can issue recapitalisation bonds, or the RBI's huge reserves of over $127 can also be dipped into to help the state-owned bank's recapitalisation needs, it said.
There is a near-unanimity among analysts that the ongoing COVID-19 pandemic will lead to an increase in bank's gross non-performing assets with some reports pegging the stock to double as well. The brokerage said the increase in non-performing assets by 2-4 percentage points will need a government recapitalisation requirement by $7-15 billion. It said the recap bonds is a tried and tested instrument which has helped the banks in the past.
