The amount of loans to be restructured in 2012-13 could increase to Rs 2 lakh crore, said CRISIL in a note on Tuesday.
There will be pressure on loans given to big corporate bodies from sectors under stress. The ratings agency said such a large amount of restructuring could help keep asset quality under check for banks.
“The large quantum of restructuring reflects the prevailing stress on corporate India’s credit quality because of lower profitability, weak demand and tight liquidity,” said CRISIL. Sectors with large debt, such as power, aviation, construction, steel, textiles and telecom infrastructure will contribute the most to the pool of restructured loans.
At the end of December 2011, loans worth Rs 75,000 crore were either restructured or being restructured. “The loans being restructured are large corporate exposures; over two-thirds of the loans restructured till December 2011 had ticket size of over Rs 1,000, crore reflecting a high level of concentration,” said Ramraj Pai, president, CRISIL Ratings.
CRISIL expects gross non-performing assets for banks to increase from 2.9 per cent in December 2011 to 3.2 per cent at the end of 2012-13. However, deterioration in India’s growth prospects and slippages from the restructured assets could lead to further increase in the gross NPAs.
There could be slippages from the agriculture and small and medium enterprises (SME) portfolios, while significant economic slowdown could add pressure to big-ticket restructured loans. CRISIL said even 20 per cent of slippages from the restructured loans could lead to further increase in gross NPAs by over 50 basis points over the medium term.
Indian banks’ comfortable capital position provides adequate cushion against the risk of increase in bad loans, said CRISIL. The ratings agency, however, pointed out that credit risk profiles of public sector banks highly depends on support from the government, which has invested and committed capital of over Rs 50,000 crore in these banks between 2009-10 and 2012-13.
Last financial year, the asset quality of public sector banks had shown sharp deterioration as they moved to automated NPA recognition system. “However, any sustained deterioration in banks’ asset quality will be monitored,” said Suman Chowdhury, director, CRISIL.
