The steady improvement in corporate asset quality is clearly reflected in key indicators such as the credit quality of bank exposures.
The biggest improvement will be in the corporate segment, where gross NPAs are expected to come down to less than 2 per cent in the next financial year.
Gross non-performing assets (NPAs) of banks are expected to decline by 90 basis points (bps) year-on-year to less than 5 per cent in the current fiscal, and by another 100 bps to a sub-four-decade low per cent by March 31, 2024, riding on post-pandemic economic recovery and higher credit growth, according to a joint report by Assocham and Crisil Ratings.
The biggest improvement will be in the corporate segment, where gross NPAs are falling to below two per cent in the next financial year from a peak of around 16 per cent on March 31, 2018, the report said. The increase in book volumes by banks in recent years, as well as stronger risk management and underwriting, has led to greater preference for borrowers with better credit profiles. Deepak Sood, Secretary General, Assocham said, “The steady improvement in corporate asset quality is clearly reflected in key indicators such as credit quality of bank exposures.
He said the twin balance sheet problem has been resolved to a large extent, leading to a situation where credit growth has started picking up significantly. “Our banking sector remains strong even in the face of persistent global challenges.”
The report states that gross NPAs in the MSME segment, which suffered the most during the pandemic, could increase to 10-11 per cent by March 2024, from around 9.3 per cent as on March 31, 2022. While the relief measures helped asset quality. After last fiscal’s decline, this segment saw the highest restructuring, at around six per cent, as compared to two per cent for the overall banking sector.
“The retail segment has maintained stable asset quality with gross NPAs expected to remain in the range of 1.8-2.0 per cent over the medium term. While the impact of higher interest rates and inflation on individual borrowers’ cash flows will need to be monitored, nearly half of retail loans are home loans, where banks cater to borrowers with relatively better credit profiles. As per reports, some pressure could be seen in segments such as unsecured loans.
It added that while retail NPAs are expected to remain stable on a percentage basis, the absolute quantum of NPAs may increase given the sharp growth in portfolio, thus providing opportunities for asset reconstruction companies (ARCs).
read all latest business news Here
