NPAs’ pain to haunt banks for some time

Rating agency Icra on Thursday said that the asset quality pain for banks are likely to continue for another few quarters with the gross non performing assets (NPA) likely to increase to `8.8 lakh crore–`9 lakh crore by the end of this fiscal.

The overall gross NPAs for forty-one listed banks increased to `8.28 lakh crore as on June 30, 2017 from `7.65 lakh crore as on March 31, 2017.

The fresh NPAs during the April-June period of FY18 at `1.15 lakh crore was the highest in the last five quarters with slippages occurring across corporates, small and medium enterprises and agriculture segments.

With only 11 per cent of fresh slippages during the quarter being from standard restructured loans, Icra said that corporate slippages outside the vulnerable book continued.

Farm loan waivers by various states and expiry of dispensation allowed on classification of overdue loans after demonetisation as NPAs, also contributed to the higher slippages in the agriculture and MSME sectors.

Icra has maintained its estimate for fresh slippages at `3 lakh crore, though it expects the net NPAs to reduce.

“The continued asset quality pressure in the large corporate segment, higher slippages from the agricultural and MSME segments on account of the transient impact of GST resulted in an increase in NPAs. With the expected moderation of the GST impact and the likely release of payments by state governments against farm loan waivers, recoveries/upgrades will improve in these segments by end of FY2018.

“Additionally, any favourable outcome on the large corporate accounts referred under the IBC would also support recoveries/upgrades during the year,” said Karthik Srinivasan, Icra.