Expressing worries, credit rating agency, India Ratings and Research (Ind-Ra) in its latest report has said that non-performing asset recognition is likely to get prolonged till the next fiscal year on the back of the recent Reserve Bank guidelines on delivery of bank credit. The report also noted that the implementation of the new guidelines can put at risk Rs 5.24 trillion debt in FY19, which could result in an increase in potential stress.
According to the report, the implementation will require a rollover of Rs 4.10 trillion of working capital loans in FY20. Out of this, Rs 1.90 trillion is likely to face a ‘high or very high rollover risks’ owing to weak operating cash flows and a high proportion of rollover requirement vis--vis debt outstanding at FY19. Further, over Rs 1.21 trillion debt (a part of the Rs 4.10 trillion) is likely to emanate from corporates rated 'AA-' and above. Ind-Ra also pointed out that the working capital- intensive sectors may get hit with the new guidelines, while export-oriented sectors are likely to remain unaffected.
Further, the ratings agency said that the burden of cash management is likely first shift to borrowers on the implementation of the new RBI guidelines on the loan system for the delivery of bank credit and this will necessitate borrowers to install systems and processes to manage surplus cash and tie-up their working capital loan components (especially rollovers) with banks in a timely manner.