Gross NPAs of banks may jump to 11.5% by end of FY21: Care Rating

The gross NPAs ratio of Indian banks is likely to be 11-11.5% by end of this fiscal and they are likely to restructure 4 to 5 per cent of the overall bank credit outstanding, according to Care Rating

The gross non-performing assets (NPAs) ratio of Indian banks is likely to be 11 to 11.5 per cent by end of current fiscal and they are likely to restructure 4 to 5 per cent of the overall bank credit outstanding, according to Care Rating.

Besides, the asset quality data post the COVID-19 lockdown is uncertain due to a developing regulatory scenario. Multiple stakeholder objectives and moratorium computation with various firms have varying ways of computing moratorium, said the rating agency.

The disruptions caused by coronavirus pandemic have further deteriorated the health of banking industry which was already reeling under severe stress for several years.

The GNPA ratio of scheduled commercial banks stood at 8.2 per cent in Q1 FY21 against 9.5 per cent in the same period of last year.

Care said the end of FY21 GNPA numbers will move significantly ahead from the 8.5 per cent level witnessed at the end of FY20 be moderated by the one-time restructuring scheme and ongoing write-offs.

The additions to GNPAs will primarily from loans under SMA-1 (special mention category) and SMA-2 categories which were under moratorium and not eligible for restructuring.

Also, banks may see stress coming from the lower-rated or stressed corporates as personal loans not eligible for the restructuring scheme and banking exposure to unsecured personal loans, said Care.