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The end of the regulatory forbearance regime for restructured loans in March 2015 might lead to a significant rise in gross non-performing assets (NPAs) of banks in the next financial year, according to rating agency ICRA. Banks’ gross NPAs could rise to 5.1-5.7 per cent of advances by March 2016 from 4.5 per cent in December 2014.
Those loans restructured from April will be treated as NPAs with a higher provision bill for them. However, total stressed advances (gross NPAs plus standard restructured advances) could moderate in FY16.
This moderation could happen due to a pick up in economic activity and RBI’s norms for flexible structuring of loans to operational projects, reducing the flow of impaired assets.
PSBs’ fresh NPA generation rate remained unchanged at 3.3 per cent in Q3 of FY15. The slippages from restructured advances accounted for around 25 per cent of fresh slippages in Q3 of FY5.
The fresh NPA generation rate for SBI dropped to an 11-quarter low of 2.4 per cent in Q3 of FY15 even as fresh NPA generation of other state-owned banks was 3.7 per cent in the same period, ICRA added.
