India's three-week long lockdown to combat spreading of coronavirus has put several sectors under pressure. While the country may still quickly recover from this period of isolation, a possible extension will deepen the pit of troubles.
That's according to Saswata Guha, director of financial institutions at Fitch Ratings India. “If the lockdown is for two or three months then some of the pressures that are arguably looking cyclical for sectors, other than banks, may very well end up looking structural. And there's the concern,” he told BloombergQuint in an interview.
The novel coronavirus outbreak has forced the government to put 1.3 billion Indians under complete lockdown to contain infection, shutting businesses temporarily in an already slowing economy. The equity indices, too, tracked the worst global selloff in more than a decade as the number of Covid-19 cases rose to more than 1,200, including 32 deaths.
The government, however, refuted rumours of a possibility of extending the lockdown.
Banking Outlook
Fitch Ratings India recently lowered its score on the operating environment for Indian banking to BB from BB+.
The sector, Guha said, was already in a weak spot and was struggling with structural problems of asset quality and liquidity issues. “What has changed, however, is the Covid-19 impact and the subsequent lockdown. We believe that the potential for the operating environment to significantly deteriorate from here on is much stronger now.”
“The general impression that we are getting from banks as well is that they haven't ever faced this situation, so essentially everything depends on the duration of the pandemic.”
According to Guha, weakness in aviation, tourism and other sectors could cause job losses, leading to non-repayment of retail loans. While the top quality non-banking financial institutions will sail through it by eroding their buffers, others may lead to defaults, he said.
Also Read: Three Sectors Remain Unscathed (So Far) From Covid-19 Hit
WATCH | Fitch Ratings On Pressure Points For Indian Banks
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