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MUM­BAI: Crisil Rat­ings on Thurs­day said banks have only recog­nised two-thirds of their stressed loans as non-per­form­ing as­sets, and es­ti­mated the bad loan ra­tio to rise by 1 per­cent­age point to 10.5 per cent by March 2018.

The 9.5 per cent NPA fig­ure for March 2017 in­cludes only two-thirds of the over­all stressed as­sets, it said.

The agency said it es­ti­mates the to­tal amount of stressed loans, which in­cludes NPAS and stan­dard as­sets that are un­der pres­sure cur­rently and could de­te­ri­o­rate into NPAS, to be at Rs 11.5 tril­lion or 14 per cent of the sys­tem.

As­sets un­der pres­sure com­prise the not-yet-recog­nised bad loans, which are recog­nised as NPAS in one bank, but not in oth­ers, re­struc­tured stan­dard ac­counts, and stressed as­sets struc­tured un­der schemes, such as the strate­gic debt re­struc­tur­ing, the 5/25 and the S4A, it said.

"Gross NPAS will be 10.5 per cent of ad­vances by March 2018, up from 9.5 per cent in March 2017," it said adding that in­fra­struc­ture, power, en­gi­neer­ing, and con­struc­tion sec­tors con­trib­ute bulk of the stressed as­sets. Faster res­o­lu­tion of stressed ac­counts through the In­sol­vency and Bank­ruptcy Code and var­i­ous struc­tur­ing schemes, is crit­i­cal to im­prov­ing the as­set qual­ity of banks, the agency said.

The re­port, how­ever, said over the medium-term, a big in­crease in stressed loans is un­likely on fac­tors like higher com­mod­ity prices, lower in­ter­est rates, im­proved cap­i­tal struc­ture, and ef­fi­ciency gains for cor­po­rates.

"With the ma­jor­ity of stressed as­sets now recog­nised as NPAS, rest of the cor­po­rate loan port­fo­lio of banks can be ex­pected to per­form bet­ter over the medium-term," Crisil pres­i­dent Gur­preet Ch­hat­wal said.

He said there will be as­set qual­ity de­te­ri­o­ra­tion in loans to small busi­nesses and farm­ers, which are im­pacted due to in­tro­duc­tion of the goods and ser­vices tax and de­mon­eti­sa­tion, and debt waivers, re­spec­tively.

But Ch­hat­wal said this is un­likely to put pres­sure on bank bal­ance-sheets the way large ex­po­sures are do­ing. Fresh NPA cre­ation will de­cel­er­ate this fis­cal, but the over­all stock would con­tinue to rise be­cause slip­pages would still out­pace re­cov­er­ies.

"In the past cou­ple of years, re­cov­er­ies have been poor and the bulk of the re­duc­tion in gross NPAS has been be­cause of higher write-offs," se­nior di­rec­tor Krishnan Si­tara­man said.

He blamed slug­gish eco­nomic growth, con­tin­ued stress in some sec­tors, and slow place of res­o­lu­tion pro­ceed­ings as the fac­tors hin­der­ing the re­cov­ery ef­forts.

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