Banks need to set aside `3.3tr for NPAs

Mumbai, Oct. 12: Banks are likely to need nearly `3.3 lakh crore this fiscal as provisioning for large NPA accounts in the current financial year, said a Crisil report.

The report said with the economic value of assets underlying NPAs eroding with time, and resolutions are hard to come by, banks would need to step up on provisioning, mainly for large corporate NPAs. It will facilitate faster clean-up of their balance sheets.

“Our estimates show that banks would need to set aside close to `3.3 lakh crore this fiscal, or 50 per cent more than `2.2 lakh crore they provided for NPAs last fiscal,” Crisil said in the report released here on Thursday.

The provisioning quantum was arrived at after an account-by-account analysis of the economic value of assets underlying large corporate NPAs.

The potential writedowns could be in the 2575 per cent range, the agency said.

While some of the NPA accounts have been adequately provided for, the majority of them will require higher provisioning compared with current levels, based on the residual economic value of the assets, it said.

“It could lead to a net loss of nearly `60,000 crore for the banking sector this fiscal with public sector banks (PSBs) bearing the brunt of increase in provisions and the resultant impact on profitability because of their higher stock of NPAs,” the report said.