: Gross NPAs to decline in FY21 due to restructuring, writeoffs & economic resilience: CARE Ratings #FinanceIndia #StockMarketNEWS Gross NPAs to decline in FY21 due to restructuring, write-offs & economic

@StockMarketNEWS Thu 27 May, 2021

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Gross NPAs to decline in FY21 due to restructuring, writeoffs & economic resilience: CARE Ratings #FinanceIndia #StockMarketNEWS
Gross NPAs to decline in FY21 due to restructuring, write-offs & economic resilience: CARE Ratings New Delhi, May 27 (KNN) Gross Non-Performing Assets (NPAs) are expected to decline in FY21 due to restructuring of accounts, loan write-offs and resilience in the economy, said a report by CARE Ratings.

According to the report which was published on Tuesday, the rating agency expects the quantum of NPAs to fall to Rs 7.9 lakh crore at the end of FY21 from Rs 8.9 lakh crore in FY20.

Several regulatory and government support schemes helped borrowers access liquidity and conserve their cash flows during the year, the rating agency said. These schemes included the moratorium on loan repayments for six months till August 30, 2020, the COVID-related restructuring scheme for large corporates till December 31, 2020, and for Micro, Small and Medium Enterprises (MSMEs) till March 31, 2021, the report said.

Wholesale NPAs have been declining during FY21, it added.

The report further said that despite a challenging year, the quantum of gross NPAs of SCBs are expected to decline by the end of March 2021 as compared with the previous year due to write-offs, lower slippage, restructuring schemes and ECLGS support for MSMEs.

However, as anticipated with the Supreme Court judgement allowing for the recognition of NPAs, FY21-end numbers are expected to be either similar or slightly above the Q3FY21 numbers, the report said.

Public sector banks (PSBs) accounted for more than 80 percent of banks’ NPAs till FY19. Over the last couple of years, the PSBs registered a substantial contraction in their GNPA amount to an estimated Rs 6 lakh crore at the end of March 2021 from Rs 6.8 lakh crore at the end of March 2020. The gross NPAs of private banks had remained within Rs 2 lakh crore since September 2017 till September 2019.

“Unlike the PSBs, the private banks have recorded a rise in their GNPA amount from Rs 1.8 lakh crore in March 2018 which breached the Rs 2 lakh crore levels in December 2019 but subsequently are expected to have retreated to around Rs 1.96 lakh crore by the end of March 2021,” CARE Ratings said in the report.

As per the report, Write-offs have played a major role in reducing bad loans. In the years before 2017-18, write-offs had a smaller share, but after FY18, the share has markedly increased, indicating that banks have cleaned their books by taking a hit. Recoveries have had a relatively smaller contribution in lowering NPAs.