Crisil Report: Bank NPAs to reach decadal low by end of FY23-24

5 Apr 2023 , 08:47 AM

By the end of FY2023–24, banks’ gross non-performing assets (NPAs) will reach a decadal low of 3.8%, said credit rating agency Crisil on Monday. When compared to the just-completed FY23’s 5.9% NPA rate, the agency expects NPAs to drop to 4.2% by year’s end. It had previously predicted that NPAs would reach 4% by the end of FY24.

According to Crisil, the improvement in the high-value corporate loan books, where the gross NPAs are expected to fall below 2%, is a significant factor influencing the bank NPAs. Corporations have been taking a number of steps to lessen their leverage, including prepaying loans.

The agency added that improved risk management and underwriting are also assisting lenders in reducing NPAs.

Krishnan Sitaraman, the agency’s deputy chief rating officer, told ET that unsecured loans make up a relatively small part of all loans when asked about the growing tendency of issuing them in the retail sector.

He said that the retail segments, which include home loans and auto loans in equal measure, account for 26% of the total exposure of the banking industry. According to him, the remaining one-fourth of the retail book includes all of the loans that are still outstanding, including personal and unsecured credit card debt.

The RBI was forced to start the asset quality assessment, as a result of which it ordered lenders to straighten up their financial records by designating specific assets as non-performing loans (NPAs).

According to the agency, the banking industry is now better capitalized because to recent capital infusions, but it will be important to keep an eye on how well it can draw in deposits to keep up with rising loan growth.

The agency declared that the Indian financial system will be able to bear the volatility amid global developments, which include some US banks failing and frantic European regulators acting to stop the spread.

India has had reduced rates of interest rate increases, healthier bank balance sheets with record-low NPAs, depositor-funded liabilities, and better asset and investment book management laws, according to the agency.

According to the agency, the banking industry would continue to grow loans at a 15% rate in FY24 compared to FY23. For the non-banks, it stated that concerns over asset quality are waning and that the assets under management are expected to increase.

According to the report, the addition of Rs70,000 crore in capital infusion into businesses over the past few years has helped. The NBFCs segment would see a 13–14% increase in asset under management to bring the total AUM to Rs34 lakh crore.

For feedback and suggestions, write to us at [e-mail]