Icra sees NPAs jumping to 5.9% by March from 4.4% in FY15

The banking sector is likely to end the current fiscal with increased gross non-performing assets (NPAs) at 5.3-5.9 per cent, primarily due to the withdrawal of the regulatory forbearance on restructured advances by the Reserve Bank from this April, ratings agency Icra said today.
For the year ended March 2015, gross NPAs stood at 4.4 per cent of the system, while in the quarter ended June 2015, the same rose to 4.7 per cent.
"Reported gross NPA percentage will increase in this fiscal year with the withdrawal of the regulatory forbearance for restructured advances from April. Gross NPAs could increase to 5.3-5.9 per cent by March 2016," Icra senior vice-president and co-head for financial sector ratings Vibha Batra said in a report on its banking sector outlook.

It said flexible structuring of weak assets may understate the reported weak assets.
The report analyses the performance of 26 public sector and 14 private sector banks.
However, another rating agency Care has pegged the NPA levels at a much lower rate.

"The overall NPAs are likely to increase by 20-30 basis points and are likely to be in the range of 4.6-4.7 per cent," Care said in a report which covers 38 banks, including 26 public sector and 12 private sector banks.
Public sector banks' NPAs are likely to increase by 30-40 basis points and is likely to be in the range of 5.2-5.3 per cent by March 2016, Care said.

Batra further said the flow of impaired assets (NPA generation plus fresh standard restructured) to moderate in FY16, on account of RBI relaxations (on restructuring of under construction projects and flexible structuring of operational projects), moderation in stress level of corporate sector, and improved operating environment.
The Icra report said state-run banks have a high 15 per cent exposure towards power generation sector and iron & steel sector, while this is only 6 per cent for private sector banks.
However, only 20 per cent of state-run banks exposure to power generation and iron and steel is classified as stressed and private banks stressed assets in the sector is at 10 per cent.

Banks' exposure to state discoms is at around Rs 1.5-1.7 trillion, Batra said.