With loans beginning to return to a regular payment schedule, most banks believe that large corporate and private borrowers have seen their financial position strengthened enough to withstand the higher payouts.

However, small businesses can still experience difficulties in their wallets.

“Within the SME portfolio, there can be some tensions in sectors that are widely accessed and dependent on physical walk-ins, such as hospitality, restaurants and retail,” said Rajiv Anand, deputy director of Axis Bank Ltd.

These are sectors where things are still below pre-Covid times and where disruptions have lasted longer than expected.

Small and medium-sized businesses that have lost their sole entrepreneur face survival challenges, said Sunil Mehta, chief executive of the Indian Banks’ Association. “Those who survived the pandemic are starting to pay back,” Mehta said, adding that the “problem is under control.”

In the retail segment, asset-backed loans such as home loans are not at risk. The bulk of private borrowing comes from housing loans and in general people are not at that risk, said a public sector banker, speaking on condition of anonymity. The risk of stress in private loans stems from education and car loans, this person added.

Lenders also believe that self-employed borrowers are at greater risk than salaried workers who saw a faster recovery in their earnings. This segment is largely funded by NBFCs, not banks, the banker quoted above said.

“Self-employed customers have been hardest hit by the pandemic. Most of them are starting to crawl back to their normal state, but some are still finding it difficult to pay off their debts,” Mehta said.

“It is difficult to predict how private and small and medium-sized loans will recover in the future, but at the moment they are performing well for us,” said PR Rajagopal, executive director of Bank of India.

This post Will Restructured Loans Start Squeezing Indian Banks?

was original published at “https://www.bloombergquint.com/business/will-restructured-loans-start-pinching-indian-banks”