Tag: stressed assets

NBFCs assets to improve on tailwinds, says Crisil Ratings

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Assets under management (AUM) of non-banking financial companies (NBFCs) is set to grow 8-10 per cent to about ₹30-lakh crore in FY2023, riding on two tailwinds — improving economic activity, and strengthened balance sheet buffers, according to CRISIL Ratings.

This compares with an estimated growth of 6-8 per cent this fiscal (to about ₹27 -akh crore) and 2 per cent last fiscal (about ₹25-lakh crore AUM outstanding).

However, the credit rating agency cautioned that NBFCs face three headwinds — competition from Banks, expected increase in gross non-performing assets and funding access, which is yet to fully normalise.

The agency noted that intensifying competition from banks, flush with liquidity, that have sharpened focus on retail loans.

It assessed that GNPAs are expected to increase, mostly because of the revision in recognition norms and, to some extent, due to slippages from the restructured book.

Gurpreet Chhatwal, Managing Director, CRISIL Ratings Ltd, said: “Many NBFCs have built higher liquidity, capital and provisioning buffers in the recent past.

“That, combined with improving economic activity, puts them in a comfortable position to capitalise on growth opportunities. However, competition from banks will intensify.”

Asset quality worries have also manifested due to recent regulatory clarifications, and uncertainty over the performance of the restructured book.

While home loans and gold loans will be the least impacted, unsecured, and micro, small and medium enterprises loans will bear the brunt.

Chhatwal observed that net-net, growth will be driven by NBFCs with strong parentage and better funding access in the two largest segments — home loans and vehicle finance.

CRISIL noted that organic consolidation is also underway with larger NBFCs gaining share.

In three fiscals through 2021, the market share of the top 5 NBFCs has risen 600 basis points (bps) to 46 per cent.

The agency said the ability to identify niches that cater to the relatively difficult-to-address customer segments and asset classes will fuel long-term growth for the sector.

CRISIL expects retail loans to see reasonably broad-based growth in the current and next fiscals supported by pick-up in demand and consequently underlying sales.

Gold, home and unsecured loans should clock the fastest growth rates. On the other hand, wholesale credit would continue to degrow as platforms such as alternate investment funds gain currency.

Stressed assets

The agency expects GNPAs to increase by 25-300 basis points (bps) based on asset class because of the new recognition norm.

However, the increase in GNPAs because of the revised recognition norms will be largely an accounting impact because, given the improving economy, the credit profiles of borrowers are not expected to deteriorate. Consequently, ultimate credit losses are not expected to change significantly.

CRISIL said the performance of the restructured book is a key monitorable.

The agency noted that while there has been across-the-segment improvement in the monthly collection efficiency ratio (MCR) of NBFCs for the quarter ended September 2021, the quantum of restructuring done under the RBI Resolution Framework 2.0 is more than last year.

Since this mostly involved offering moratorium, the performance of this book after moratorium is monitorable.

Overall, fragile assets (GNPAs + slippages due to the impact of regulatory norms and from the restructured book) are seen at ₹1.3-1.6 lakh crore, tantamount to 5-6 per cent of the industry’s AUM as of March 2022.

This does not factor in the impact of a third wave of Covid-19, especially the just-discovered Omicron variant, which is a risk factor.

Krishnan Sitaraman, Senior Director and Deputy Chief Ratings Officer, CRISIL Ratings Ltd, said, “While there may be apprehensions about rising reported GNPAs, additional disclosures by NBFCs around underlying delinquency profiles and collection efficiencies can help allay them.

“Those with low leverage, high liquidity and strong parentage are expected to benefit from better funding access at optimal rates. For the rest and especially mid-sized and smaller players, co-lending, securitisation, or other partnerships with banks will facilitate a funding-light business model.”

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RBI panel spells out norms to streamline functioning of ARCs

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The performance of asset reconstruction companies (ARCs) in management of stressed assets of banks/financial institutions (FIs) since inception in 2003 is still uneven on several parameters, according to a Reserve Bank of India’s Committee to Review the Working of Asset Reconstruction Companies.

Overall recovery made by the ARC sector during FY04-FY13 was 68.6 per cent when measured in terms of redemption of Security Receipts (SRs), which are issued by ARCs as part of securitisation of assets acquired, as a percentage of total SRs issued, the report said.

However, the same comes down to 14.29 per cent when the redemption is measured in terms of the book value of the assets acquired.

RBI panel favours sale of stressed assets by lenders at early stage

“This implies that banks and other investors could recover only about 14 per cent of the amount owed by their borrowers,” the committee headed by Sudarshan Sen, former Executive Director, RBI, said.

The total SRs issued reflects the cost of acquisition for the ARCs vis-à-vis the book value of such financial assets. Redemption of SRs is a proxy for the amount recovered from these accounts.

ARCs are required to resolve the assets within a maximum of eight years of acquisition of financial assets and redeem the SRs representing the assets. Therefore, the period after FY13 has SRs for which resolution is still underway.

Winds of change in the stressed assets market

Business revival

The committee observed that ARCs’ performance in ensuring revival of businesses has also been poor. The data indicate that approximately 80 per cent of the recovery for the sector, so far, has come through deployment of methods of reconstruction that do not necessarily lead to revival of business.

“ARCs have rarely used methods such as change in or takeover of the management of the business of the borrower or conversion of debt into equity in a borrower’s company,” the panel said.

Rescheduling of payment of debts was also involved only in 19.9 per cent of the recovery made by ARCs.

The committee underscored “The overall performance of ARC Sector has left much to be desired. However, it would be incorrect to assume that the problems of ARC sector are entirely of its own making. In fact, the ageing of NPAs before their sale may be contributing to poor recovery. This gets further aggravated by lack of debt aggregation.”

Revival of stressed business typically requires additional funding which is difficult to come by for old NPAs.

“Inadequate capital at ARC level and the regulatory prescription limiting the extent of funds that could be raised, from external investors through securitisation, seems to have made ARCs’ attempt at revival of businesses even more difficult. ARCs’ lack of skill sets in turning around borrowers cannot be ignored,” the committee said.

The panel emphasised that despite the reshaping of the ecosystem available for lenders for handling of stressed assets and the ARC sector’s sub-optimal performance and its challenges, the ARC model remains relevant as a private sector led permanent institutional framework for out-of-court resolution of stressed assets of the financial sector.

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IBC needs a stronger push: Crisil

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The Insolvency and Bankruptcy Code (IBC) needs a stronger push after recovery of about ₹2.5 lakh crore over five years since it took effect, according to Crisil Ratings.

From here, reforms must stress quicker resolution and maximise recovery, the credit rating agency said in a study.

Per the agency: “A closer look at the data shows, however, the recovery rate and resolution timelines have a lot more room for improvement.

“This makes a continuous strengthening of the Code and stabilisation of the overall ecosystem imperative.”

Lesser traction

As of June 30, 2021, IBC had enabled recovery of about ₹2.5 lakh crore, against admitted financial claims of about ₹7 lakh crore, translating to a recovery rate of 36 per cent for the 396 cases resolved out of the total 4,541 admitted.

Of the remaining cases, 1,349 were under liquidation; 1,114 were closed under appeal/ review/ settled or withdrawn, and 1,682 were outstanding.

The agency emphasised that the recovery marks a significant shift in the insolvency resolution process and credit culture in India.

Gurpreet Chhatwal, Managing Director, Crisil Ratings, said: “The recent resolution of a large financial services firm with a recovery of about ₹37,000 crore against admitted financial claim of about ₹87,000 crore, translating to a recovery rate of about 43 per cent, underscores the efficacy of IBC. The resolution value was about 1.4 times the liquidation value.”

The agency underscored that while the IBC has tilted the power equation in favour of creditors from debtors and helped strengthen India’s insolvency resolution ecosystem, its performance against its twin objectives – maximisation of recovery and timebound resolution – has been a mixed bag.

“One, only a few large cases have seen higher recovery. Excluding the top 15 cases (by resolution value) from the 396 resolved cases, the recovery rate halves to 18 per cent.

“Two, average resolution time for the aforementioned resolved cases is 419 days compared with the stipulated maximum of 330 days. About 75 per cen of outstanding cases have already been pending for more than 270 days,” the study said.

Liquidation: a challenge

Nitesh Jain, Director, Crisil Ratings, noted that besides low recovery rate and longer timeframe, a key challenge is the high number of cases going to liquidation.

“As of June 30, 2021, nearly one-third of the 4,541 admitted cases had gone into liquidation, with a recovery rate estimated at merely 5 per cent.

“That said, around three-fourths of these cases were either sick or defunct. With closure of these vintage cases, recovery rate as well as timelines are expected to improve,”he said.

Notwithstanding these challenges, the IBC has played a key role in resolution of stressed assets so far, according to the study.

“Its effectiveness will continue to be tested given the elevated level of stressed assets in the Indian financial system,” it added.

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Amid asset quality woes, FPIs pull out nearly ₹11,000 crore from financials in July

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Foreign portfolio investors (FPIs) have pulled out close to ₹11,000 crore from the financial services sector stocks in July amid concerns over the spike in fresh slippages and asset quality deterioration from the key sector constituents — banks and NBFCs.

According to NSDL data, FPIs pulled out ₹10,767 crore from the financial services sector in July. Of the same, ₹7,341 crore was pulled out from banks while the remaining ₹3,426 crore outflow was from ‘Other financial services’ which includes NBFCs and financial institutions (FIs). The outflow from the financial sector accounts for 95 per cent of the overall FPI outflow during the month across 35 sectors.

“The banking index has been underperforming on concerns of asset quality deterioration. The 6-month Nifty Bank return is only 0.43 per cent while the 6-month Nifty return is 8.8 per cent This under-performance has been largely due to the poor performance of HDFC Bank and Kotak Bank. These two were FIIs’ favourites,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Almost all private and public sector banks have posted good results in the first quarter in terms of earnings, profitability and business growth. However, fresh slippages and elevated levels of non-performing assets still remain a concern for the investors. Take State Bank of India for instance. The country’s largest lender posted its highest ever quarterly net profit at ₹6,504 crore in Q1FY22. However, fresh slippages during the quarter went up to ₹15,666 crore (from ₹3,637 crore in the year-ago quarter). Although, the bank said it was able to claw back Q1 slippages to the tune of ₹4,700 crore in July.

Covid impact

Similarly, major private sector banks including HDFC Bank, ICICI Bank, Axis Bank have all witnessed deterioration in their asset quality in the first quarter due to the impact of the second wave of pandemic.

In its recent report on largest private sector lender HDFC Bank, Emkay Global said, “The bank has managed the first Covid wave well, but the GNPA ratio shot up to a decadal-high of 1.5 per cent in Q1, reflecting accumulated Covid-induced stress in the retail portfolio and the impact of the health scare on collection teams’ mobility.”

The RBI also, in its Financial Stability Report (FSR), said macro stress tests indicate that the gross non-performing asset (GNPA) ratio of scheduled commercial banks may increase from 7.48 per cent in March 2021 to 9.80 per cent by March 2022 under the baseline scenario; and to 11.22 per cent under a severe stress scenario.

Portfolio rejig

Market experts also attribute the FPI outflow from the financial services stocks to the sector’s underperformance and portfolio rejig efforts by the foreign investors.

Motilal Oswal Financial Services’ recent analysis on institutional ownership in Nifty-500 and Nifty-50 companies highlighted that in the Nifty-500 universe, FIIs have the highest ownership in private banks (48 per cent) followed by NBFCs (31.5 per cent), Oil & Gas (22.5 per cent), Insurance (21.6 per cent) among others.

“Financials has had a dominant run over the past few years. However, BFSI’s (private banks, NBFCs, insurance, and PSU banks) underperformance has continued to reflect in the FII allocation – down to 38 per cent in the Nifty-500 as of June, from 45.1 per cent in December 2019 and 40 per cent in March 2020. This has resulted in the trimming of weight by 130 bps q-o-q (quarter-on-quarter),” it added.

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Lenders set up bad bank for loans in default, BFSI News, ET BFSI

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Mumbai: Public sector lenders led by Canara Bank have officially formed the bad bank — the National Asset Reconstruction Company (NARC). Their next step now is to obtain approval from the Reserve Bank of India (RBI) to function as an ARC.

In May, banks decided to appoint Padmakumar M Nair, chief general manager in charge of stressed assets in SBI, as the MD of the NARC. According to RBI norms, an ARC should have minimum net owned funds of not less than 15% of the total financial assets that it plans to acquire on an aggregate basis or Rs 100 crore.

According to industry sources, lenders have identified 22 asset loan accounts worth Rs 82,496 crore. Assuming a book value of half the loan amount, the ARC would have to pay out around Rs 6,000 crore to purchase the assets. This is because the RBI norms require that 15% of the value of the asset has to be paid in cash, while the rest can be paid for by issuing security receipts (SRs). These SRs entitle the holder to a share of the recovery effected by the ARC.

To make the SRs more attractive to buyers, the government will guarantee recovery of up to Rs 31,000 crore. Lenders said that the objective of the guarantee was to provide comfort to investors and the average recovery is usually higher than the guaranteed amount provided. The notification in respect of the guarantee is likely after NARC obtains a registration from the RBI.

The loans that have been approved for transfer to the ARC include Videocon Oil Ventures (Rs 22,532 crore), Amtek Auto (Rs 9,014 crore), Reliance Naval (Rs 8,934 crore), Jaypee Infratech (Rs 7,950 crore), and Castex Technologies (Rs 6,337 crore).



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RBI may tweak rules to reduce ARCs’ cash outgo when buying stressed assets

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The Reserve Bank of India may tweak the ‘skin in the game’ criteria for Asset Reconstruction Companies (ARCs) in cases where they link-up with an investor to buy stressed assets from lenders on 100 per cent cash basis.

The central bank is examining the possibility of lowering an ARC’s contribution to acquire a stressed asset on all-cash basis from 15 per cent of the acquisition price to 2.5 per cent to 5 per cent.

The reason for this is that there are investors willing to bring in a chunk of money (95-97.5 per cent of the acquisition price) for buying stressed assets.

Given banks’ preference to sell their stressed assets on all-cash basis, the lowering of the ‘skin in the game’ requirement will alleviate ARC’s capital constraints and encourage them to step up purchase of bad loans. This, in turn, will help banks clean up their books. In cases where ARCs acquire stressed assets through a mix of cash and stressed assets, they are required to invest a minimum of 15 per cent of the security receipts. Hari Hara Mishra, Director, UV ARC, observed that in three years from 2018 to 2020, the cash component of purchase consideration paid by ARCs to seller banks and financial institutions went up three times from 28 per cent to 87 per cent.

“There is a long-felt need to reduce minimum contribution by ARCs in 100 per cent cash transactions from existing 15 per cent to 2.5 per cent in line with guidelines as applicable to Alternative Investment Funds (AIFs),” he said.

Reducing stress in sector

Mishra emphasised that this would enable ARCs to arrange more funds and absorb more non-performing assets, thereby reducing stress in the financial sector.

Pallav Mohapatra, MD & CEO, ARCIL, said: “What we want is that when an ARC, along with an investor, acquires a stressed asset on a 100 per cent cash basis from a bank, in such cases the regulator should, I think, reduce the 15 per cent requirement of contribution by ARCs. This can be reduced to 5 per cent.”

Mohapatra underscored that investors are proactive when it comes to seeking regular updates on resolution of stressed assets and recovery. Hence, ARCs will be on their toes despite lower skin in the game.

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SBI to keep up the momentum of stressed assets recovery: Dinesh Kumar Khara

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State Bank of India (SBI) will put in all efforts in FY22 to keep up the momentum of recovery made in stressed assets in FY21, according to Chairman Dinesh Kumar Khara.

This will be aided by the roll-out of pre-packaged insolvency for resolution, resumption of courts and formation of National Asset Reconstruction Company Ltd (NARCL).

India’s largest bank will make judicious use of all recovery options at its disposal, he said.

 

However, Khara underscored that it is too early to call a possible deterioration of asset quality in banks due to the second wave.

“The Bank over the last two financial years was dealing with a steep rise in stressed assets. All-round effort in managing stressed accounts initiated in FY2019 was carried through in FY2020 as well.

 

“However, the outbreak of the pandemic and subsequent lockdown in FY2021 altered the dynamics of stressed asset recovery. Bank had to grapple with disruption in normal proceeding at NCLT due to Covid-19 infections,” the SBI Chief said in the latest annual report.

Furthermore, the Reserve Bank of India (RBI) mandated a standstill clause for some portfolios.

Reduction in NPAs

“Despite all this, the bank was able to achieve a reduction in the level of Gross NPAs (non-performing assets) by ₹22,703 crore by March 2021.

“The corporate segment saw the largest reduction in NPA at ₹18,530 crore, while other segments remained more or less stable,” Khara said.

The gross NPA ratio of the Bank accordingly declined to 4.98 per cent from 6.15 per cent last year.

Khara said SBI is comfortably placed in terms of growth capital.

“Opportunities for lending in promising sectors will be explored to diversify the portfolio and contain risk,” he added.

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IDBI Bank has transformed into a retail bank: Samuel Joseph, Dy MD

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During the four years that IDBI Bank was under prompt corrective action (PCA), it transformed itself from a predominantly corporate bank to a retail bank. And the Bank, which exited PCA on March 10, 2021, would like to keep it that way, according to Samuel Joseph J, Deputy Managing Director. In an interaction with BusinessLine, he emphasised that it had aggressively accelerated provisioning, over and above the regulatory requirement, in the past to strengthen its balance sheet. So, write back to profits in the next two to three years, whenever the recovery from stressed assets happens, will be about ₹7,500 crore. Excerpts:

Now that your bank is free from the shackles of PCA, how does it plan to grow business?

During the period that we were under PCA, we were consolidating our position. We completely revamped our risk management policies, especially concerning corporate credit. So, everything was ready (for growing business) before we exited PCA. But unfortunately, the exit coincided with lockdown and related economic uncertainty. However, we will be able to expand our book in FY22. We propose to grow our corporate loan book by 8-10 per cent and our retail book by 10-12 per cent.

There is an impression that our Bank is a corporate bank. But if you look at our March 2021 numbers, our corporate to the retail ratio in the overall loan book was 38:62. This is a significant shift from where we were three-four years ago when the ratio was 60:40.

Going forward, we would like to keep the corporate book at about 40-45 per cent and the retail book at about 55-60 per cent.

And even on the liabilities side, we have transformed our liabilities franchise, and today our CASA (current account, savings account) is 50.45 per cent of total deposits. Even within term deposits, our reliance on bulk deposits is less than 15 per cent. Three years back, CASA was at about 37 per cent.

So, we have used the PCA period well to completely transform our business mix and strengthen the balance sheet.

How did you strengthen the balance sheet?

The first thing was recognition of non-performing assets (NPAs). We made aggressive provisioning for the NPAs and took the hit upfront on our Profit & Loss (P&L) account. So, today, our provision coverage ratio is at 96.9 per cent. The huge losses in 2019-20 were all because of aggressive accelerated provisioning. This was not required as per the regulatory norms, which give banks a gliding scale (for provisioning). Going by this, 96.9 per cent provisioning is not required at all. But we made accelerated provisioning to absorb the pain upfront. So, though the Gross Non-Performing Assets (NPA) ratio is slightly elevated at 22.37 per cent, the net NPA ratio is only 1.97 per cent as of March-end 2021.

We have not aggressively written off NPAs in the past because of the uncertainty relating to future profitability. But now that we have made five quarters of profit, we are fairly certain. Of course, we will wait for the Covid uncertainty to clear up, promoter change and all that and then we should be able to bring down GNPA by writing off 100 per cent provided for accounts.

How much provision write-back can you get from recoveries?

Our Gross NPAs are at about ₹36,000 crore. Technically written off (TWO) accounts already in our book aggregate to about ₹43,000 crore. So, both put together is about ₹79,000 crore. And this is about 97 per cent provided for….On average, let us say, we recover about 15 per cent. So, on ₹79,000 crore, we will be able to recover about ₹11,850 crore. Now, let us take a more conservative estimate — say, we recover only about ₹10,000 crore. Our net NPAs are only ₹2,500 crore because of aggressive provisioning. So, provision write-back to profits in the next two to three years, whenever the recovery happens, will be about ₹7,500 crore. The future (profit) potential of this aggressive past provisioning will at least be ₹7,000 crore to ₹7,500 crore going forward in the next two to three years.

Our Capital to Risk-weighted Assets Ratio (CRAR) is 15.59 per cent. So, from now on, we will be able to recoup our capital and increase CRAR much further. So, this is what we have done — on the P&L part, we have absorbed the pain upfront, and we have strengthened our balance sheet to recoup our capital through recovery and write-back to profits in the next two to three years.

Did you zero in on the stressed assets you will transfer to the National Asset Reconstruction Company Ltd?

We have identified the stressed assets for the transfer. The criteria for the transfer is that they should have been 100 per cent provided for, not be categorised as fraud, and it should not be very close to a resolution or recovery. Using these filters, we have identified the assets. We have a list of 11 accounts aggregating about ₹12,000 crore to be transferred to NARCL.

The immediate visual impact of this transfer on our balance sheet will be by way of a reduction in our Gross NPA ratio. Out of this ₹12,000 crore, some of the accounts may even be TWO accounts. The impact of TWO accounts is already reflected in our books. So, if out of ₹12,000 crore, Gross NPAs and TWO accounts amount to ₹6,000 crore each, then the GNPA could come down about 3.50 per cent.

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NARCL to further Govt’s agenda of disinvestment of IDBI Bank, privatisation of PSBs

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The National Asset Reconstruction Company Ltd (NARCL), currently being put together by banks and other lenders, may structurally alter the balance-sheets of banks in such a way that it will further the Government’s agenda of divesting its stake in IDBI Bank and privatising two public sector banks (PSBs).

Once chunky stressed assets are out of the books, the valuation of these banks will improve, making them more saleable, opine market experts.

This can help the government realise more value from the proposed sale of its 45.48 per cent stake in IDBI Bank to a strategic buyer as well as privatisation of two PSBs.

Ramnath Krishnan, President-Ratings & Chief Rating Officer, ICRA, observed that NARCL might structurally help with disinvestment in state-owned banks should the Government consider this in the future. “It might structurally alter the balance-sheets of certain banks, which could make them more saleable should disinvestment be an opportunity seriously considered by the Government,” Krishnan said.

Referring to IDBI Bank’s healthy provision coverage ratio (PCR), Mangesh Kulkarni, Research Analyst, Almondz Global Securities, assessed that with most of its legacy assets being provided for 100 per cent, it can straight away transfer them to NARCL. So, the path to divestment of Government’s stake in IDBI Bank and privatisation of two PSBs will be streamlined once NARCL starts operations, he added.

IBA sets the ball rolling

The Indian Banks’ Association (IBA) has set the ball rolling on NARCL with the appointment of State Bank of India’s Padmakumar M Nair as its new Chief. Nair is currently Chief General Manager with SBI’s Stressed Assets Resolution Group.

NARCL is being set up following Finance Minister Nirmala Sitharaman’s FY2022 Budget announcement that the high level of provisioning by public sector banks on their stressed assets calls for measures to clean up the bank books.

Stressed assets with principal outstanding of ₹500 crore and above, aggregating about ₹1.50- lakh crore, are expected to be transferred to NARCL.

At a recent press meet, Rakesh Sharma, MD & CEO, IDBI Bank, said large public sector and private sector banks will be investing in NARCL, with each bank taking less than 10 per cent stake. IDBI Bank will also consider investing in the company.

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Covid-19: Bankers favour a flexible loan revamp plan to help small borrowers

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With economic uncertainty looming amidst surging coronavirus cases and lockdowns put in place by several States, many banks are understood to favour a flexible loan restructuring package, especially to help small borrowers and entrepreneurs.

“Banks don’t want customers to feel like delinquents or get NPA tags just because of the pandemic and economic situation. A flexible restructuring programme for banks to help out customers at this point in the crisis would be helpful,” said a source familiar with the development.

The proposal of a flexible loan restructuring scheme is understood to have also been discussed at recent meetings of the Reserve Bank of India with bankers.

While the first 15 days of April saw normal collections for most banks and non-banking financial companies, there are worries going ahead.

“No one is sure how the month of May will pan out,” said the source.

Amitabh Chaudhry, Managing Director and CEO, Axis Bank had said at the fourth-quarter results that he expects collections to be impacted in coming weeks due to the local lockdowns though they have been strong in the initial weeks of the fiscal year.

Yes Bank MD and CEO Prashant Kumar also said that till April 15, collection efficiency for the lender was at 96 per cent, but there would be some impact after that though data is not available.

The Finance Industry Development Council recently requested the RBI for restructuring stressed retail and individual borrowers of NBFCs whether or not they had sought it earlier.

Needed an umbrella policy

“We need an umbrella policy offering options for restructuring including permission to undertake simple process for business restructuring, inducting new investor, restoring finance or any assistance to rebuild operations of SMEs, MSMEs, start-ups, retail borrowers ignoring their previous defaults, if any. The second and third wave could be more lethal and we need more human policy then regulatory flexibility,” said Nitin Potdar, Partner, J Sagar Associates.

While industry and bankers are hoping that the government and RBI will announce a fresh set of relief measures, some lenders believe that a fresh round of loan restructuring may not be the best way forward.

“It is still early days and more data may be needed on collection trends. We should not use restructuring to postpone the problem,” said a banker, who did not wish to be named.

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