Banks likely to restructure Rs 8.4 lakh crore of loans: Ind-Ra

India Ratings and Research (Ind-Ra) in its latest report have stated that the banks are likely to restructure up to Rs 8.4 lakh crore of loans or 7.7 per cent of the overall system's credit, under Reserve Bank of India’s proposed loan restructuring scheme to bring down COVID-19 related stress.

Out of the overall loans set to be restructured, almost 60 per cent of them were inclined to slip into the non-performing assets (NPAs) category if not for the recast move. The restructuring will help banks' bottom-line as the money to be set aside as provisions will be lower.

According to the report, unlike the earlier experience of the aftermath of the global financial crisis, where nearly 90 per cent of the restructuring happened in the corporate loans, the non-corporate segment, which comprises small businesses, agricultural loans, and retail lending, will account for a higher share this time. It is also being estimated that the total amount of non-corporate loans to be recast is Rs 2.1 lakh crore. It noted that the non-corporate segment was showing signs of stress even before the pandemic started and when things seemed to be normal in the corporate space.

In the corporate segment, the report pointed out that Rs 4 lakh crore of loans were already stressed before COVID-19 struck and the same has gone up by over Rs 2.5 lakh crore. It also said that the jump in the non-corporate segment is more pronounced, as the stressed portion was only Rs 70,000 crore, which is now slated to go up to Rs 2.1 lakh crore. Within the corporate segment, it said that the restructuring may range from Rs 3.3 lakh crore to Rs 6.3 lakh crore, depending upon the banking strategies. It added that the range is wide because 53 per cent of the pool is at high risk, while 47 per cent is at moderate risk.