By Aditya Raghunath
Investing.com -- Indian banks can be hit by a double whammy of lower business and riskier assets thanks to the resurgence of COVID-19 cases in the country, according to rating agency Fitch.
India recorded over 1.31 lakh cases and 802 deaths yesterday, the most number of fatalities since October 17, 2020. While Maharashtra continues to lead the country with the highest number of cases, fives states: Chhattisgarh, Uttar Pradesh, Madhya Pradesh, Gujarat, and Rajasthan recorded their highest daily cases.
“We consider the micro, small and medium enterprises (MSME) and retail loans to be most at risk. Retail loans have been performing better than our expectations but might see increased stress if renewed restrictions impinge further on individual incomes and savings,” said Fitch.
Six states (Maharashtra, Kerala, Tamil Nadu (NS: TNNP ), Karnataka, Punjab, and Uttar Pradesh) account for 45% of bank loans. “Any further disruption in economic activity in these states would pose a setback for fragile business sentiment, even though a stringent pan-India lockdown like the one in 2020 is unlikely,” Fitch said.
Bengaluru and six other cities in Karnataka will see a night curfew imposed from April 9-April 20. Night curfew is already imposed in UP in Noida, Meerut, Allahabad, and Ghaziabad.
However, one positive factor from the report is that Fitch believes the banking sector is better-poised this time around to handle the shocks and says the impact could be modest this time.
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