Service Sector


  • Overall services are expected to record (-) 4.2% contractions in FY21.
  • In order to keep the borrowing cost low, RBI has further trimmed its repo rate to 4%.
  • However, due to prolonged lockdown, financial as well as other services are expected to be severely impacted.
  • In service sector, real estate and road transport are the major services that are expected to be severely impacted. In addition, hotel and tourism (hospitality related) sector is expected to take longer time to recover.
  • On the other hand, extended moratorium on repayment of loans had been extended earlier this year. Accordingly, moratorium related risk for commercial banks and NBFCs remains a critical moniterable.
  • Similarly, weak offtake is expected to lower the earning of the banking sectors. However, banks are investing in government securities to minimize the interest cost and YTD growth in commercial bank treasury investment is recorded at over 18%.
  • Due to unfavourable economic outlook, retail sector is likely to take longer time to recover.
  • In addition, with the negative economic outlook, the NPA level (for the financial sector) is expected to increase once normalcy (in terms of liquidity and policy stance) returns.