Axis Bank Awaits ‘Structured, Seamless’ Restructuring Package Amid Lockdown
The obvious thing to do is to allow some kind of forbearance to relieve stress in the banking sector, Axis Bank’s MD says.
Axis Bank Ltd. said the banking industry was waiting for the government and Reserve Bank of India to come up with a “structured, seamless framework” to deal with the stress arising from a nationwide lockdown amid the coronavirus pandemic.
The obvious thing to do is to allow some kind of forbearance, restructuring or leeway in repayments of term loans and extension of working capital cycle, Amitabh Chaudhry, managing director at the private lender, told BloombergQuint in an interview. “Bonds are another instrument where concerted action is required.”
The novel coronavirus outbreak, which has killed 10 people in India and infected more than 600 so far, forced the government to lock down the nation for 21 days. Finance Minister Nirmala Sitharaman, in a press meet Tuesday, said the government is in the process of formulating a relief package for the economy and an announcement in this regard would be made soon.
How bad will the asset quality hit be for lenders? “Frankly none of us know,” Chaudhry said, adding that the impact could first show in the retail book and then in micro, small and medium enterprises.
A section of the banking sector is already going through “a bit of a liquidity crunch”, owing to the fact that mutual funds are facing redemptions and sentiment has weakened amid the coronavirus crisis, Chaudhry said. But he expects the situation to improve once the “restructuring package” is announced.
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While Axis Bank is doing fresh disbursements, it is also careful about managing risk. “It’s only expected that all of us ask the question whether the corporates who are asking for money are the right ones to do incremental lending to.”
WATCH | Axis Bank MD Amitabh Chaudhry On Implications Of India Shutdown
On Wednesday, Axis Bank shares rose 9.35 percent to Rs 331.50 apiece on the NSE while the benchmark Nifty 50 gained 6.62 percent to end the day at 8,317.85 points.
