Reflecting the trend of sizable chunk of restructured assets turning into bad loans, rating agency CARE has pegged Indian banking sector’s gross non-performing assets (NPAs) at 3.5 per cent of gross advances by March 2011.
The moratorium period on most restructured loans will be completed by the next quarter and it remains to be seen if banks can control and restrict the slippage.
It expects 15 per cent restructured assets to be converted into NPAs in FY11. This was in addition to the normal system NPAs, CARE said.
Although domestic growth drivers continue to remain robust, the pace of global recovery continues to remain uncertain. Hence managing credit growth and asset quality while sustaining earnings growth would be key challenges for banking industry, it said.
At the time of reviewing the banking sector’s performance for the nine months ended December 2009, CARE had projected gross NPA levels at 2.8 per cent (approx) by March 2010. The overall gross NPAs of all scheduled commercial banks (SCBs) stood at Rs 81,813 crore (2.5 per cent of Gross Advances) as on March 31, 2010.
Almost 70 per cent of this (Rs 57,301 crore) was on the books of public sector banks. Asset quality continued to deteriorate during April-June Q1FY11 with public sector banks witnessing higher level of slippages leading to pressure on their gross and net NPA ratios.
During the first quarter, the absolute level of gross NPAs for select banks as on June 30, 2010 rose by 28.7 per cent y-o-y to Rs 80,879 crore. The public sector banks accounted for almost 75 per cent of this.
The overall gross NPA ratio for PSU banks was influenced by increased slippages in SBI, Bank of India, IOB, PNB, IDBI and Union Bank, which together accounted for almost 64 per cent of the increase in gross NPAs.
Slippages from the restructured portfolio averaged around 10 per cent across most public sector banks and contributed to the increase in NPAs for public sector banks.
