Gross non-performing assets (NPAs) of banks are expected to rise to 8-9% this fiscal from 7.5% as on March 31, but they would still remain below the peak of 11.2% seen at the end of fiscal 2018, Crisil Ratings said in a report.
COVID-19 relief measures, such as the restructuring dispensation and the Emergency Credit Line Guarantee Scheme (ECLGS), would help limit the rise, it said.
“With 2% of bank credit expected under restructuring by the end of this fiscal, stressed assets — comprising gross NPAs and loan book under restructuring — should touch 10-11%,” the ratings agency said.
“The retail and MSME segments, which together form 40% of bank credit, are expected to see higher accretion of NPAs and stressed assets this time around,” said Krishnan Sitaraman, senior director and deputy chief ratings officer.
“Stressed assets in these segments are seen rising to 4-5% and 17-18%, respectively, by this fiscal end. The numbers would have trended even higher but for write-offs, primarily in the unsecured segment,” he added.
The rural segment, which was hit harder during the second wave of the pandemic, has also seen a strong recovery. Therefore, stressed assets in the agriculture segment are expected to remain relatively stable, the ratings agency pointed out.
It said the estimates were predicated on a base-case scenario of 9.5% GDP growth this fiscal and continued improvement in corporate credit quality.
A virulent third wave and significant deceleration in demand growth could pose significant downside risks to these estimates, it added.