Banks’ gross NPA may peak at around 11.5%: Crisil
Gross non-performing assets in the banking system, which stood at 11.2% in FY2018, is likely to touch 11.5% in this fiscal, says a report.
In FY18, GNPAs increased to around ₹10.3 lakh crore, or 11.2% of advances compared with ₹8 lakh crore, or 9.5% of advances, as on March 31, 2017. “We expect gross NPAs in the banking system to peak at around 11.5% this fiscal and then start reducing,” rating agency Crisil said in report on Tiesday.
In FY18, the banking system reported a net loss of ₹40,000 crore because of the sharp rise in NPAs and the resulting increase in provisioning costs. In the previous fiscal, as much as ₹5 lakh crore of bank loans slipped into the nonperforming assets (NPAs) category, taking the total slippages in the past three fiscals to ₹13.6 lakh crore.
About a fifth of the slippages in FY18 was due to withdrawal of various structuring schemes by the Reserve Bank in February, after the Insolvency and Bankruptcy Code (IBC) process came into force, the report said. The rating agency, however, said the tide is slowly turning and it expects moderation in slippages, better recoveries from NPAs and improved provision coverage to bode well for banks.
The accounts which are in the special mention account-2 (SMA-2, where exposures are overdue by 60-90 days), have more than halved to 0.8% of advances as of last fiscal-end, compared with 2% a year before, indicating considerable reduction in stressed loans that can potentially regress into NPAs, it said. “Further, prospects of recovery from stressed accounts referred to the National Company Law Tribunal (NCLT) are improving. More than a quarter of the ₹3.3 lakh crore worth of cases referred to NCLT for resolution are from the steel sector which has seen heightened bidding interest due to improving prospects for the sector,” the rating agency’s senior director, Krishnan Sitaraman, said.
The agency’s director, Rama Patel, said the banking systems provisioning cover (excluding write-offs) for NPAs increased to 50% as on March 31, 2018, compared with 45% a year back, and it is expected to improve further in this fiscal. It further said staterun banks remain highly dependent on the government for capital to meet Basel III norms.
MUMBAI: