With restructured assets in better health than before, rating agency CARE said additions to gross non-performing assets (NPAs) of listed commercial banks for the financial year ending March would be less than the estimated. The ratio of gross NPAs to advances would be less than the previous estimate of three per cent, it said yesterday.
Following the global financial crisis in 2008, the Reserve Bank of India (RBI) had allowed banks to do a second restructuring without lowering the account status. Only viable units facing temporary cash flow problems were allowed to take the benefit of this. Banks had also gone for restructuring on their own for some accounts.
The increase in slippages in restructured portfolios has been less than expected. The slippages had been beyond 15 per cent (of the restructured portfolio) only in case of some banks and not across the board, said P Soujanya, the manager and part of the team which authored the report.
“For 2010-11, taking into account the lower level of slippages from restructured assets to NPAs as well as the improving economic scenario, the gross NPA ratio would be somewhat lower than our earlier projection of three per cent,” she said.
The scope for significant across-the-board treasury gains could be limited in the medium term, given the hardening interest rate scenario. An increase in NPA provisioning and rise in slippages in restructured assets could temper profits for banks (especially public sector banks), said the report.
The absolute level of gross NPAs for select banks rose 23.8 per cent (year-on-year) to Rs 89,556 crore, with public sector banks accounting for almost 80 per cent of these.
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Overall gross NPAs as a percentage of advances, however, fell on account of a pick-up in credit and improved recovery levels. Slippages from the restructured portfolio averaged five-10 per cent across most public sector banks.
Excluding technical write-offs, the overall provision coverage ratio (PCR) improved. Most banks have reported a PCR (including technical write-offs) of close to the 70 per cent mandated by RBI.