Gross NPAs of banks to rise to 8-9% from 7.5%: Crisil

‘Retail, MSMEs to contribute more to stressed assets, NPAs’

October 19, 2021 09:48 pm | Updated 09:48 pm IST - MUMBAI

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.

‘Write-off effect’

“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.

‘Base-case scenario’

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.

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