Gross bad loan levels in Indian banks may rise to 9.7 per cent by March-end: ICRA ratings

While the headline asset quality and restructuring numbers are encouraging, these don’t reflect the underlying stress, it noted. 
Image used for representation. (Photo | PTI)
Image used for representation. (Photo | PTI)

NEW DELHI: With the impact of various relief measures, including a moratorium on loan repayment and the asset classification standstill fading away, the Indian banking system’s gross non-performing asset levels are likely rise to as much as 9.6-9.7 per cent by March 31, 2021, says a report from Icra Ratings. GNPAs (gross non-performing assets) of banks may worsen further to 9.9-10.2 per cent by March 31 next year, it added. 

ICRA said that despite the impact of the Covid-19 pandemic on the debt servicing ability of borrowers, the gross fresh slippages for banks stood much lower at Rs 1.8 lakh crore during the first nine months of fiscal 2020-21 as compared to Rs 3.6 lakh crore the previous year.

This has been driven by various relief measures such as the moratorium on loan repayment, a standstill on asset classification and liquidity extended to borrowers under Guaranteed emergency credit line (GECL), it added.

As of 2020, the GNPA and NNPA (net non-performing assets) of banks stood at 8.3 per cent and 2.7 per cent respectively as of December 31, 2020, compared to 8.6 per cent and 3 per cent as of March 31, 2020. While the headline asset quality and restructuring numbers are encouraging, these don’t reflect the underlying stress, it noted. 

Solvency position better for banks now: Report

With the decline in NNPAs and improved capital position driven by fresh capital raises this fiscal as well as internal accruals that were buffered by a sharp decline in bond yields, the solvency position for the banks stands relatively better providing some comfort to their loss absorption abilities.

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