Expect a spill-over of the Yes Bank fiasco on the economy is a sort of warning coming in from Sonal Varma, chief economist-India at Nomura.

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“I would say that some of this has been boiling for some time now. It may have come to the fore today but some of the tight credit conditions and underlying asset quality issues have been there with us. So, specifically from here, there are spillovers on existing entities who have exposure,” she added.

“However, there are broader concerns around the telecom sector and even the real estate developers and the SMEs who have suffered because of lack of funding because of the NBFC crisis. Even for them, in terms of asset quality cycle is likely to deteriorate for the NBFC sector because of potential defaults from these sectors," she said, adding that we have had a fairly prolonged period of economic slowdown and now the COVID-19 hitting the global economy.

"Net-net what implies for India is elevated credit risk and this is not just about Yes Bank. There are other sectors where there is pressure,” said Varma, adding that the Yes Bank issue is not of liquidity but a credit risk problem.

She said, the house has downgraded growth forecast because of Covid-19. "We now think that in the January-March quarter growth will slow down to 4 percent from 4.7 percent in the December quarter and for calendar year 2020, we have revised down our number to 4.7 from around 5.4 percent," she added.

"There are credit risks and growth related risks. Therefore, the central bank will need to remain accommodative,” she further added.

She said the coronavirus situation has had an impact on global demand. “If you have domestic credit risk and a global slowdown hitting together, the aggregate impact on the asset quality cycle and on growth could be a lot larger."

According to her, there are various scenarios that can play out depending on how global and domestic plays out. "Our current assessment, as I mentioned, 2020 growth at 4.7 percent is lower than 2019. So, essentially there is no big recovery seen and if global and domestic both go on the negative side, it could be even lower. Therefore, we need to be very careful particularly around asset quality issues in the coming months,” Varma added.

On RBI policy front, she said they expect the central bank to deliver an additional 50 bps rate cut by June.