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Package for financial institutions to help ease asset risk but won't fully offset COVID-19 blow: Moody's
May-19-2020
Few days after the government’s stimulus package, the rating agency Moody's Investors Service in its latest report has said the measures announced for financial institutions as part of Rs 20 lakh crore-economic package will help ease their asset risk, but will not fully offset the negative impact from the COVID-19 outbreak.

On MSME package, Moody's noted that the sector was already under stress before coronavirus outbreak and further slowdown in economic growth will lead to more liquidity woes. With regard to measures for NBFCs, it said the support is far lower than the immediate liquidity requirements of those companies and the sector will continue to pose risks to the banks.

Further, the rating agency said that amongst the measures, the most significant is the government guaranteed, automatic and uncollateralised loans to MSMEs. It underlined that such loans will help improve MSMEs’ near-term liquidity and ease asset risks for the banks and NBFCs who are the key lenders to the sector.

However, the report said the MSME sector was already under financial strain before the outbreak of the coronavirus because of the gradual slowdown in India's economic growth over the past 18 months. As a consequence, it has limited capacity to weather another economic shock.

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