Even as some banks assert about being resilient in the face of insolvency resolutions in 12 largest default accounts, foreign brokerage Morgan Stanley said it sees banks’ provisioning for those accounts doubling from the current level.
The brokerage also warned that merging small and weaker PSBs with larger ones to help tide over their capital issues will be counterproductive for the acquiring banks.
“We think provisioning on these loans is 30-40% currently and could increase to around 60%. This could imply 0.40-0.90% increase in credit cost for the system,” Morgan Stanley said in a note.
