The net non-performing assets (NPAs) of Indian banks may surge by 27% to Rs 2,00,000 crore by end of the current fiscal, according to a study by industry body Assocham. The NPAs stood at Rs 157,000 crore at the end of first quarter of the fiscal, it said.
Besides, the continuing pressures on Indian economy may also result in pushing the NPA ratio from 2.94 per cent in June end to about 3.75 per cent by the end of the current fiscal, said the study titled ‘Growing Heat of NPAs on Banking Sector’.
“A plethora of issues like rising trends in stress assets, increased provisioning, issues of the asset quality and challenges of requisitioning additional capital to keep up growing business together with burgeoning twin deficits of fiscal and current account have collectively contributed to this dismal situation of increased NPA levels and falling bottom line,” said D S Rawat, secretary general of the industry chamber while releasing the findings of the study.
The further impact of the various external factors like – court interventions, delay in reforms, reluctance of passing cost to consumers, absence of clarity on various tax issues, have created an environment of uncertainty resulting in slow pace of economic activities. Apart from this, growing slackness in performance of small and medium enterprises (SMEs) and agriculture sector are signs enough to show that banks’ NPAs are bound to rise, it said.
Rawat said the credit off take has also sharply tanked due to various issues like environment related approvals, land acquisition and other such issues. “Existing exposure of banks to poor performing sectors like power, aviation, highways, micro-finance institutions (MFIs), ports, telecommunication and others have lead to high levels of stress assets.”
Besides, a strong deceleration expected particularly in fourth quarter of the current fiscal and fist quarter of the next fiscal will also have a negative impact on asset quality of Indian banking industry.
