The domestic banking sector, already grappling with bad loans worth Rs 9 lakh crore, may be in for more bad news because of coronavirus that has crimped economic activity.

India Ratings and Research (Ind-Ra) on Thursday forecast banks may witness slippages, or fresh non-performing assets (NPAs), of Rs 5.7 lakh crore. This means a gross NPA ratio of 15 per cent for domestic banks.

According to the rating agency, the Covid-19 led lockdown has intensified the domestic macro-economic concerns over GDP growth, employment and demand-supply. Major disruption and loss of economic activity across all the domestic sectors prompted Ind-Ra to revise downwards its GDP estimates for the current fiscal to 1.9 per cent, the lowest in 29 years.

“With a significant drop in economic activity, Ind-Ra expects most sectors in India to experience varying degrees of revenue contraction during 2020-21 because of demand and supply disruptions. This presents fresh challenges for banks which over the last four years have been reeling under corporate stress,” it said.

The agency added that banks have already faced elevated provisions resulting from the corporate stress cycle over 2015-16 to 2020. Banks had largely provided for the stress and were progressing towards a more moderated credit cost cycle. However, the Covid-19 related measures are likely to result in another cycle of stress. Here, it added, the pressure on non-corporate segments is likely to intensify.

Forecasting corporate slippages of Rs 3.4 lakh crore in the current fiscal, India Ratings said that based on its vulnerability framework and stress analysis of 30,000 companies, the total standard-but-stressed corporate pool may increase from 3.8 per cent of the total bank credit as of December (pre-Covid-19 levels) 2019 to up to 6.6 per cent under its post Covid-19 corporate stress case.