Rating agency ICRA said banks' NPA ratios may see a sharp rise to 5.5-6.5% in June 30, 2015 from the present 3.3% once the RBI's revised guidelines on bad asset classification come into force.
"As for the likely impact of the guidelines on non-performing assets (NPAs), there could be a steep increase in the reported NPA percentage from 3.3% as on March 2013 to as high as 5.5-6.5% as in June 30, 2015," the rating agency said in a note.
Giving the rationale behind such possible rise, the report said that with the change in classification of old restructured advances would be the reason behind this.
Yesterday, the Reserve Bank of India came up with new guidelines on restructured advances and non-performing assets (NPA). As per the new norms, standard account on restructuring will be immediately classified as NPA on restructuring from April, 2015 with certain exceptions.
On the stringent conditions imposed for restructuring by RBI, the rating agency said that restructuring would be more difficult, prompting unviable exposures to slip into NPA category.
It, however, noted that tighter norms for restructuring would increase transparency with access to more information for investors.
However, the rating agency noted that reporting of higher gross NPAs by banks will not have any material impact on the credit profile of these entities.
"However, increase in reported Gross NPA would not have a material impact on the credit profile as vulnerability would remain the same," it said.
Referring to restructured advances, the report said that with the new guidelines, the level of restructured advances was likely to be reduced.
