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Credit rating agency Crisil said in a report that gross non-performing assets (NPAs) of banks are expected to increase to 8-9% in the current financial year. At the end of the fiscal 2018, this was well below the peak of 11.2%. According to the agency, Covid-19 relief measures such as the Emergency Credit Line Guarantee Scheme (ECLGS) and the restructuring dispensation will help reduce the rise in banks gross NPAs.
It said that with around 2% of bank credit expected under restructuring by the end of this fiscal, stressed assets which comprises of gross NPAs and loan book under restructuring, should touch 10-11% this fiscal.
MSME to see higher NPA
The report also said that retail and MSME segments, which together form close to 40% of bank credit, are expected to see higher accretion of NPAs and stressed assets this time around.
Stressed assets in these two segments are seen increasing to 4-5% and 17-18%, respectively, by the end of this fiscal.
The agency said operationalisation of the National Asset Reconstruction Company Ltd (NARCL) by end of this fiscal and the expected first-round sale of Rs 90,000 crore NPAs could lead to lower reported gross NPAs.
The report expected the corporate segment 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.
It further said that 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.
In the current fiscal, the report expects corporate stressed assets to remain range-bound at 9-10%. This is evident from restructuring of only around 1% in the segment.