Nifty99000 100%

Sensex99000 100%

Article rating: No rating
Article rating: 4.8
Article rating: 5.0
Article rating: 3.0
Article rating: No rating
Article rating: 5.0
Article rating: No rating
Article rating: No rating
Article rating: 4.5
Article rating: No rating
Article rating: No rating
Article rating: 4.2
Article rating: 5.0
Article rating: 4.0
Article rating: No rating
Article rating: No rating


Banks’ bad loans to reach 10.5% by March 2018: Crisil

Author: IANS/Friday, September 15, 2017/Categories: Banking & Financial Services

Banks’ bad loans to reach 10.5% by March 2018: Crisil

New Delhi - The banks bad loans or non-performing assets (NPAs) will reach 10.5% of the total advances by March 2018, an increase from 9.5% on March this year, domestic rating agency Crisil said in a report.

About two-thirds of the overall stressed assets in the banking system has already been recognised by banks as NPAs as on March 31, 2017. 

"Fresh NPA creation is expected to decelerate this fiscal, but the overall stock would continue to rise because slippages would still outpace recoveries. The stressed assets include both reported gross NPAs and standard assets that are under pressure currently and could deteriorate into NPAs over the medium term," the report said.

"In the past couple of years, recoveries by banks have been poor and the bulk of the reduction in gross NPAs has been because of higher write-offs," Krishnan Sitaraman, Senior Director, CRISIL Ratings, said. 

Sluggish economic growth, continued stress in some sectors and slow place of resolution proceedings have been constraining recoveries.

The infrastructure, power, engineering, and construction sectors contribute bulk of the stressed assets in the banking system. 

"With the majority of stressed assets now recognised as NPAs, the rest of the corporate loans portfolio of banks can be expected to perform better over the medium term," the report said.

"However, the performance of MSME and agriculture loans could see some deterioration mainly due to the impact of Goods and Services Tax (GST) and farm loan waivers, respectively. But these are unlikely to stress bank balance sheets the way large corporate NPAs did," Gurpreet Chhatwal, President, CRISIL Ratings, said.

"The Micro, Small and Medium Enterprises (MSME) sector could face some asset quality challenges in the near term due to the impact of demonetisation and the need to conform business processes to the GST regime. But banks are better placed here because exposures are spread across industries and not as chunky as corporate loans," it said.

"Farm loan waivers by some states has led to a spurt in overall agriculture loan NPAs. While most of the increase should get corrected as banks receive payments from states, there would be some impact on credit discipline in the near term," it added.

The report stated that stressed loans are unlikely to see big increase hereon with the two-thirds already recognised as NPAs by banks.

"Crisil estimates stressed assets in the banking system to be around Rs 11.5 lakh crore, or approximately 14% of total advances and does not expect this number to increase significantly over the medium term," it said.

Faster resolution of stressed accounts through the Insolvency and Bankruptcy Code and various structuring schemes, therefore, is critical to improving the asset quality of banks. 

That's because of gradual recovery in the credit quality of corporates driven by higher commodity prices, lower interest rates, improved capital structures and efficiency gains. 

The assets under pressure mostly comprise not-yet-recognised bad loans, restructured standard accounts and stressed assets structured under schemes.

Print Rate this article:
No rating

Number of views (267)/Comments (0)

rajyashree guha


Other posts by IANS
Contact author

Leave a comment

Add comment



Ask the Finapolis.

I'm not a robot
Dharmendra Satpathy
Col. Sanjeev Govila (retd)
Hum Fauji Investments
The Finapolis' expert answers your queries on investments, taxation and personal finance. Want advice? Submit your Question above
Want to Invest



The technical studies / analysis discussed here can be at odds with our fundamental views / analysis. The information and views presented in this report are prepared by Karvy Consultants Limited. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither Karvy nor Karvy Consultants nor any person connected with any associate companies of Karvy accepts any liability arising from the use of this information and views mentioned in this document. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above mentioned companies from time to time. Every employee of Karvy and its associate companies is required to disclose his/her individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Consultants Ltd. This report is intended for a restricted audience and we are not soliciting any action based on it. Neither the information nor any opinion expressed herein constitutes an offer or an invitation to make an offer, to buy or sell any securities, or any options, futures or other derivatives related to such securities.

Subscribe For Free

Get the e-paper free