Ind-Ra cuts banking outlook to negative on rising NPA, credit cost

As per Ind-Ra's bear case, the spike in stressed assets due to pandemic is expected to double the credit costs for banking system

India Ratings and Research (Ind-Ra) on Friday revised its outlook on the banking sector to “negative” from “stable” for the second half of the financial year 2020-21 (October 2020-March 2021, or H2FY21) on an expected spike in stressed assets and higher credit costs. Earnings, it said, may take a hit on account of interest reversals and lower fee income.
 

The domestic rating agency said growth prospects for the sector are muted in the wake of the measures taken to contain the spread of the Covid-19 pandemic. Additionally, capital buffers for most public sector banks (PSBs) remain modest.
 

According to Ind-Ra’s