The asset quality of Indian lenders, especially the restructured loan book, is at risk from a potential third wave of COVID-19, ICRA Ratings said in a report.

With the increased spread of the new variant Omicron, there is a high possibility of the occurrence of a third wave, said Anil Gupta, Vice President, Financial Sector Ratings, ICRA Ratings. As banks restructured most of these loans with a moratorium of up to 12 months, this book is likely to start exiting the moratorium from Q4 FY2022 and Q1 FY2023, he noted.

Therefore, a third wave poses high risk to the performance of the borrowers that were impacted by the previous waves and hence poses a risk to the improving trend of asset quality, profitability, and solvency, he said.


Banks had implemented 83% of the total requests (76% for public sector banks and 86% for private banks) received under COVID 2.0, leading to an overall restructuring of 1.2 trillion of loans till September 30, 2021, Mr. Gupta observed.

As the restructuring re quests could be implemented till December 31, 2021, incremental restructuring could increase by 15 20 basis points from the current levels, Mr. Gupta opined. The third wave could revive the demand for the restructuring of loans, including loans which were already restructured, he said.