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The death toll in Kerala floods has gone up to 400. Photo: AFP
The death toll in Kerala floods has gone up to 400. Photo: AFP

Kerala floods will lead to losses, recovery delays for banks

Agriculture tops the list of sectors with the highest loan exposure at 24%, followed by MSME (16%) and housing loans (11%), according to Jefferies

New Delhi: Financial services major Jefferies on Monday said floods in Kerala will lead to some recovery delays and losses for banks, typically in agriculture loans, micro, small and medium enterprises (MSME) priority sector loans, home loans and trade activities. “Incessant rains since 8 August have caused Kerala’s worst floods in a century, and at least 186 people have perished, many of them killed by landslides."

Agriculture tops the list of sectors with the highest loan exposure at 24%, followed by MSME (16%) and housing loans (11%), according to Jefferies.

“Reserve Bank of India (RBI) regulations allow restructuring of loans in case of natural calamities but banks will need to make higher provisions with respect to restructured loans; expect RBI’s relaxation to defer non-performing loan spike in the near term," Jefferies said in the note.

For south India Bank, Kerala advances as percentage of total advances is around 41%, while for Federal Bank it is around 36%.

Stocks of Federal Bank fell 6.4% on the BSE on Monday. South Indian Bank declined 3.8%.

Banks’ overall loan exposure to Kerala stood at 3% of the total advances in 2017-18, according to Jefferies.

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