Banks to see sharp fall in bad loans, but exposures to small businesses a worry: Crisil 

The GNPAs will improve further in FY24 to a decadal low of 4 per cent, the report by Crisil Ratings said.

Published: 22nd September 2022 01:09 AM  |   Last Updated: 22nd September 2022 01:09 AM   |  A+A-

Crisil logo.

Crisil logo. (


MUMBAI: Banking system's Gross Non-Performing Assets (GNPA) will decline by 0.90 per cent to 5 per cent by the end of the current fiscal on a significant improvement in the large corporate exposures, a report said on Wednesday.

The GNPAs will improve further in FY24 to a decadal low of 4 per cent, the report by Crisil Ratings said.

However, it said that all is not well on the dud asset front, and banking system's exposures to the Micro, Small and Medium Enterprises (MSME) sector is a worry.

Gross NPA in the MSME segment, which suffered the most during Covid pandemic, may rise to 10-11 per cent by March 2024 from 9.3 per cent as on March 31, 2022, the agency said.

"While relief measures did help contain asset quality deterioration last fiscal, the segment saw the most restructuring at 6 per cent compared with 2 per cent for the overall banking sector.

About a fourth of these accounts could potentially slip into NPAs," it explained. Unlike MSMEs, large corporates have been doing good as a borrower segment, it said.

The large corporate segment will witness the biggest improvement with the gross NPAs set to fall below 2 per cent next fiscal from a peak of 16 per cent as on March 31, 2018, the agency said.

A study of large exposures of banks, constituting more than half of corporate advances, shows the share of high-safety exposures has increased to 77 per cent as on March 2022 from 59 per cent in March 2017, while exposure to sub-investment grade companies more than halved to 7 per cent versus 17 per cent, Crisil's deputy chief rating officer Krishnan Sitaraman said.

The agency said the asset quality improvement in the corporate segment follows a significant clean-up done of bank books in recent years, and strengthened risk management and underwriting and added that this has also led to increased preference for borrowers with better credit profile.

It added that deleveraging and strengthening of India Inc balance sheets also helped.

With much of the stress in the corporate loan book already recognised and better quality of incremental lending, restructuring for this segment was low at 1 per cent, covering only a few corporate groups.

Mechanisms such as the Insolvency and Bankruptcy Code have also supported recoveries and increased credit discipline among borrowers.

The asset quality of the banking sector will also benefit from the proposed sale of NPAs to the National Asset Reconstruction Company Ltd (NARCL), it added.

India Matters


Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on are those of the comment writers alone. They do not represent the views or opinions of or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. reserves the right to take any or all comments down at any time.

flipboard facebook twitter whatsapp