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Second Wave Continues to be Menace as Risks to Financial Organization Climbs up across India: Fitch Ratings

The relief measures announced by the RBI to offer some relief to financial institutions in the next 12-24 months, but at the charge of deferring the recognition and resolution of underlying asset quality problems.

Risks to India’s financial organizations were climbing as the second wave of Covid-19 was depleting the economy’s near-term recovery momentum, said global rating agency Fitch Ratings.

Although the shock to the economy may not be as severe as last year, risks remained of the extended disruptions and lockdowns on account of infections spreading further than previously deduced, however the resurgence of coronavirus infections could delay the Indian economic recovery.

The central bank had declared liquidity-boosting and loan-restructuring steps beginning of this month. Fitch Ratings said the reintroduction of a restructuring plan for individuals and small businesses may be consequential for lenders. 

India Ratings and Research (Ind-Ra) stated that the second wave of infections will be less disruptive than the first wave for the business domain, in-spite of the case load per day reaching more than four times the highest-level reached during the first wave, since the administrative response is probable to be limited to local lockdowns. It has predicted 10.1% rise in an analysis. 

Crisil Research said the first half of FY22 would be supported by a base effect but clouded by the spread of infections, while the second half would be backed by better-spread economic growth owing to increased inoculations and better adaptability to the pandemic.  

India Ratings and Research (Ind-Ra) stated that the second wave of infections will be less disruptive than the first wave for the business domain, in-spite of the case load per day reaching more than four times the highest-level reached during the first wave, since the administrative response is probable to be limited to local lockdowns. It has predicted 10.1% rise in an analysis. 

Ind-Ra anticipate incremental anti-cyclical fiscal spending to be muted in FY22, given the stretched financial year condition. The nature of fiscal support would be implicit and helpful, rather than any direct stimulus to augment aggregate domestic demand conditions. It also stated that the labour challenge is more feasible this time, though there could be a period of disturbance.

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