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The Covid-19 pandemic has posed a fresh set of challenges to the already slowing Indian economy as well as to the financial services sector, which has been reeling under a huge pile of non-performing assets (NPAs) over the last few years.
With the lockdown already washing out the first quarter and the pandemic showing no sign of easing, will FY21 be a year of lost opportunity for the financial sector? Will non-performing assets, which appeared to be coming under control, flare up again once the moratorium ends? What will be the impact of an one-time restructuring of debt? When will the recovery emerge?
These were some of the issues that were discussed at the BusinessLine Knowledge Series Webinar, ‘Will Banks See a Second Wave of NPAs?’, moderated by Deputy Editor Surabhi on Friday.
Shyam Srinivasan, MD and CEO of Federal Bank, said: “While we do not have any history or textbook reaction to deal with anything like the current pandemic, one should not think of the whole FY21 as a lost case. I think we should take our horizon up to two financial years and try to look at life beyond this period.”
Drawing an cricketing analogy to highlight both the challenges and opportunities available from the pandemic, Srinivasan said: “Put your head down and play the difficult over, and there will be opportunities to score your fours and sixes.”
Seconding this opinion Krishnan Sitaraman, Senior Director-Financial Sector & Structured Finance Ratings at CRISIL, also said one should look at the issue slightly medium-term horizon. “Within this yearApril to June will be a stressed period. With lockdown getting released in many parts of the country, we should see some element of demand pick-up coming in the second part of this fiscal in terms of economic activity as well as pent-up demand.”
However, VP Nandakumar, MD and CEO of Manappuram Finance, was less optimistic. He said there is no visibility to the end of the pandemic. “The challenge is that we are not seeing the end of the tunnel. Even in case of demonetisation, we could see the end of the tunnel, but in this case, we could not see where it would end.”