Big & tech savvy doing well as others struggle amidst pandemic

By Prakash Chawla

New Delhi, Dec 31 (2021) How is Indian economy doing in the midst of the looming threat of Omnicron variant of the Covid-19 pandemic? Large companies and those driven by technology have managed the challenge well while those in the informal and the MSMEs continue to struggle. In fact, RBI’s Financial Stability Report has summed up the state of play in an apt manner.

When it comes to Indian corporates, they have gained ” strength and resilience through the pandemic and key financial parameters of listed non-financial private companies indicate improvement”. It said bank
credit growth is showing signs of a gradual recovery, led by the retail segment, although flow of credit to lesser rated corporates remains hesitant. Besides, micro, small and medium enterprises (MSMEs) as also the
micro finance segment are reflecting signs of stress.

After a macro stress test, the RBI report found that there exist credit risks for the scheduled commercial banks. ”SCBs’ GNPA ratio may increase from 6.9 per cent in September 2021 to 8.1 per cent by September 2022
under the baseline scenario and to 9.5 per cent under a severe stress scenario. The stress tests show that all banks would be able to comply with the minimum capital requirements even under severe
stress scenarios”.

It said the global economic recovery has been losing momentum in the second half of 2021 in the face of resurfacing COVID-19 infections, the new variant Omicron, supply disruptions and bottlenecks, elevated inflationary levels and shifts in monetary policy stances and actions across advanced economies and emerging market economies.

”Emerging signs of stress in micro, small and medium enterprises (MSME) as also in the micro finance segment call for close monitoring of these portfolios going forward ”, the RBI report pointed out.

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