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Banks to witness reduction in NPAs
Higher recoveries and slowdown in fresh bad loans are likely to reduce banks non-performing loans (NPAs) to nearly 8 per cent by March 2020, says a report.
Mumbai: Higher recoveries and slowdown in fresh bad loans are likely to reduce banks non-performing loans (NPAs) to nearly 8 per cent by March 2020, says a report.
NPA in the banking system had peaked at 11.5 per cent in March 2018 and then declined to 9.3 per cent in March 2019.
"Asset quality of banks should witness a decisive turnaround this fiscal (FY20) with gross NPAs reducing by 350 basis points (bps) over two years to around 8 per cent by March 2020.
This will be driven by a combination of reduction in fresh accretions to NPA as well as stepped up recoveries from existing NPA accounts," Crisil said in a note.
It said public sector banks (PSBs), which account for over 80 per cent of the NPAs in the system, should see their gross NPAs climb down over 400 bps to close to 10.6 per cent by March 2020 from a peak of 14.6 per cent in March 2018.
Slippages have been on the wane since last fiscal and the rate of accretion of fresh NPAs halved in FY19 to 3.7 per cent compared with 7.4 per cent in the previous fiscal and is expected to drop to around 3.2 per cent in FY20, the note said.
This is mainly because banks have already recognised around Rs 17 lakh crore of stressed loans as NPAs since FY16, led by accelerated NPA recognition following the Reserve Bank of India's (RBIs) stringent norms and asset quality reviews.
