Mumbai: The impact of the low cost telecom services to be launched by RJio will not be restricted to just the telecom sector, but could percolate down to the banking sector.
While flagging of the near term risk to the telecom sector, Kotak Securities said the latest development raises risk to earnings of large and leading players and there would be a direct impact on the loans given by banks as well.
“This stress, if they occur, would be quite chunky in nature and timing would be uncertain. We could see borrowers looking to elongate their repayment of loans under the various schemes, such as 5:25, introduced by RBI.
“Among our coverage, Yes Bank and IndusInd Bank have one of the largest exposures towards the telecom sector. In the past, we have seen banks looking to down-sell some of their exposures to other banks, but the current development raises questions if this can be done as comfortably as before,” said Rohit Chordia and Abhas Gupta of Kotak Institutional Equities Research.
The overall exposure of loans provided by banks towards the telecom sector is less than 1.5 per cent of their total loans. Stress, if any, according to Kotak Securities has come primarily from telecom equipment manufacturers or select telecom infrastructure providers.
