Moody\u2019s said that the high take-up rate by large corporates is surprising because companies typically have access to resources to weather near-term stress. They may have partly been motivated by a desire to preserve cash in uncertain economic times. \u201cThe high take-up rates by borrowers of small finance banks (SFBs) and non-bank finance companies (NBFCs) is a result of these institutions\u2019 greater exposure to riskier customer segments, such as those with more volatile income streams,\u201d Moody\u2019s said.<\/p>\n
The higher take-up rates by borrowers from public-sector banks (PSBs) as compared to that of private-sector banks was partly because of differences in the way the two sets implemented the moratorium. While PSBs largely operated an opt-out scheme, where customers are presumed to have taken up the moratorium unless they decided to opt out, private-sector banks largely implemented an opt-in scheme. \u201cThe higher take-up rates by corporate borrowers from public-sector banks also point to risks of the moratorium having an impact on borrowers\u2019 behaviour and, potentially, their willingness to repay,\u201d Moody\u2019s said, adding that banks have recognised this risk and have begun to place much greater emphasis on collections even though they continue to offer repayment moratoriums. This is reflected in the decline in loans under moratorium at the end of June compared with the previous months.<\/p>\n
Nevertheless, moratorium take-up rates remain high. \u201cFurthermore, the decline in moratorium take-up rates does not necessarily mean that customers no longer in the moratorium category have no overdue payments. This is because most banks stop classifying a customer as being in the moratorium category even if only a partial repayment has been made,\u201d Moody\u2019s said.<\/p>\n
The rating agency also referred to the results of banking system stress tests conducted by the RBI. Even as they suggest banks\u2019 gross non performing assets (NPAs) are set to rise meaningfully under all four stress test scenarios, with their common equity tier-I (CET-I) ratio declining by one to two percentage points, most banks\u2019 capital ratios would remain above the regulatory minimum. This is a credit-positive that reflects the banks\u2019 balance sheets\u2019 resilience to the stress of the coronavirus-induced economic downturn, as well as government infusions of capital to PSBs over the past two years. \u201cTherefore, even with the estimated decline, capitalisation at these banks will be higher than at the trough in 2018,\u201d Moody\u2019s said.<\/p>\n
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