Rating agency Crisil today said the pace of rise in banks' non-performing assets (NPAs) is likely to slow down in months ahead as firms are now in a better position to repay their loans in a recovering economy.
"NPAs may continue to rise but at a lower level than we expected six months ago," Crisil Chief Executive Officer and Managing Director Roopa Kudva said.
NPAs refer to loans that run the risk of default. Once the borrower has failed to make interest or principal payments for a period of time fixed by banks, the loan is considered to be a non-performing asset.
Last year, the rating agency had projected that the gross NPAs in the banking sector would touch 5 per cent of the total assets by the end of fiscal 2010-11. However, this level may come down to 4.5 per cent in the changed scenario, Kudva said.
A majority of the banks had seen a sharp rise in their slippages in the wake of the global financial crisis, as businesses took a hit and resulted in job losses.
Recently, SBI Chairman, O P Bhatt had said there was a possibility of bad loans rising in the next few months, especially those given to small and medium sized companies though it would be under a manageable level.