Asset quality pressures continue to haunt banks in FY14

Crisil research: gross NPAs of banks are estimated to be around 3.5% as of March 2013 up from 2.9% as of March 2012

Asset quality pressures are expected to continue for banks even in the current fiscal. It is expected that the gross Non-Performing Assets (NPAs) ratio will rise in the current fiscal.

“The central bank's recent rate cuts are unlikely to ease asset-quality pressures to any great extent or help Indian banks correct their funding imbalances, said Fitch Ratings on in a research report.

According to Fitch Ratings the infrastructure sector is likely to be the biggest risk for Indian banks in the year ending March 2014, putting pressure on asset quality and exacerbating structural funding mismatches. The pace of infrastructure restructuring is likely to accelerate, as the start dates of projects under construction are delayed over the next 18 months, said Fitch Ratings.

Crisil Research is of the view that the gross NPA ratio of banks are expected to increase further to 3.8-4% by March 2014, due to slippages from loans restructured in 2011-12, continued loan repayment pressures in sectors such as power and construction, and higher NPAs in segments such as commercial vehicles financing.

Gross NPAs of banks are estimated to be around 3.5% as of March 2013 up from 2.9% as of March 2012, said Crisil Research.

However, few banks do not agree to the views of analysts. “Asset quality concerns are there. But it also depends upon the asset profile a bank is having and also how the economy picks up. I think for our bank the worst in asset quality is behind us. We have been able to contain the fresh delinquencies,” said CG Pinto, general manager and chief financial officer of Corporation Bank.