: Bank gross NPAs to rise to 8-9%, stressed assets to touch 10-11%: Report #FinanceIndia #StockMarketNEWS #Business Mumbai: Gross non-performing assets (NPAs) of banks will rise to 8-9 per cent this

@StockMarketNEWS Thu 21 Oct, 2021

Posted in: #Business #FinanceIndia #StockMarketNEWS

Bank gross NPAs to rise to 8-9%, stressed assets to touch 10-11%: Report #FinanceIndia #StockMarketNEWS #Business
Mumbai: Gross non-performing assets (NPAs) of banks will rise to 8-9 per cent this fiscal, well below the peak of 11. 2 per cent seen at the end of fiscal, ratings agency Crisil said in a report.

The Covid-19 relief measures such as the restructuring dispensation, and the Emergency Credit Line Guarantee Scheme (ECLGS) will help limit the rise, the report added.

With 2 per cent 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 per cent.

Krishnan Sitaraman, Senior Director and Deputy Chief Ratings Officer, CRISIL Ratings, said: “The retail and MSME segments, which together form 40 per cent of bank credit, are expected to see higher accretion of NPAs and stressed assets this time around. Stressed assets in these segments are seen rising to 4-5 per cent and 17-18 per cent, respectively, by this fiscal end. The numbers would have trended even higher but for write-offs, primarily in the unsecured segment. ???

The retail segment, which had a relatively stable run over the past decade, has been singed by the pandemic, with salaried and self-employed borrowers alike facing significant income challenges and higher medical expenses, especially in the second wave.

Thus, in a first-of-its-kind move, the Reserve Bank of India (RBI) introduced loan restructuring for retail borrowers to help them tide over the situation. This followed a six-month moratorium permitted by lenders last fiscal.

Despite the measures, CRISIL Ratings believes stressed assets in the retail segment will rise to 4-5 per cent by the end of this fiscal from 3 per cent last fiscal. While home loans, the largest segment, will be the least impacted, unsecured loans are expected to bear the brunt of the pandemic.

The MSME segment, despite benefiting from ECLGS and the recent limit enhancement and tenure extension, is likely to see asset quality deteriorate and will require restructuring to manage cash-flow challenges. In fact, restructuring is expected to be the highest for this segment, at 4-5 per cent of the loan book, leading to a jump in stressed assets to 17-18 per cent by this fiscal end from 14 per cent last fiscal, Crisil said.

The corporate segment, though, is expected to be far more resilient. A large part of the stress in the corporate portfolio had already been recognised during the asset quality review initiated five years ago. That, coupled with the secular deleveraging trend, has strengthened the balance sheets of corporates, and enabled them to tide over the pandemic relatively unscathed compared with retail and MSME borrowers. This is evident from restructuring of only 1 per cent in the segment.