RBI Guidelines on delivery of bank credit may increase potentially stressed debt: Fitch

Published: Jan 19, 2019, 8:54 am IST

Mumbai, Jan 18 (UNI) The implementation of the recent Reserve Bank of India’s guidelines on the loan system for the delivery of bank credit is likely to require a rollover of Rs 4.10 trillion worth of working capital loan in FY20, believes India Ratings and Research (Ind-Ra).
About Rs 1.90 trillion worth of debt is likely to face a high or very high rollover risk owing to weak operating cash flows and a high proportion of rollover requirement vis-à-vis debt outstanding at FYE19.
The implementation of the new RBI guidelines could put at risk Rs 5.24 trillion worth of debt at FYE19; this could result in an increase in potential stress and extend the non-performing asset recognition cycle for banks to FY20.
In Ind-Ra’s opinion, the new RBI guidelines are likely to affect working capital-intensive sectors the most. Meanwhile, export-oriented sectors are likely to remain unaffected by the new guidelines, according to the agency.
The top two sectors by rollover requirement are likely to represent nearly 35 per cent of the total rollover requirement of the top 500 debt-heavy corporates in FY20.