Stressed assets management company Alvarez & Marsal today said the situation on NPA front is unlikely to improve this fiscal.
"Our view is that this number (NPA) is going to go up. Even with the new government coming in or same government staying, whatever happens is going to take time," Nikhil Shah, Senior Director, Alvarez & Marsal, said.
In case of a stable government, there might be some impact of it on the stock market but "nothing much will change in next year" regarding the NPAs, he said.
The World Bank in a report released yesterday had said in India the problem is the banking sector's growing exposure to company debt. The fear is that this could ultimately affect the government's finances through its ownership of state banks and the need to prop up distressed but systemically important banks.
The Reserve Bank of India (RBI) recently had issued guidelines to banks for early detection and curbing of non-performing assets (NPAs).
Shah welcomed the changes in guidelines, saying it will be beneficial for the economy as a whole.
He said that the sale of bad assets by banks to ARCs is bound to increase this fiscal and cited findings of a survey carried out by the company.
The survey said 40 per cent of the banks feel they will prefer asset sale to an ARC by invitation, while another 40 per cent would go for a restructuring and the remaining 20 per cent may try recovery by sale.
The survey said bankers feel dealing with promoters is the biggest challenge when tackling NPA accretion and added that the issue is further compounded by lack of clear guidelines to aid a swift and successful restructuring.
He said we need changes in the working of the regulatory bodies like the Debt Recovery Tribunals.
In its financial stability report released last December, the RBI said the stressed assets including the NPAs and the restructured assets have touched 10.2 per cent, including 4.2 per cent in GNPAs.
RBI has projected the GNPAs to move up to 4.6 per cent by September 2014, and then improve to 4.4 per cent by March 2015.
