INSUBCONTINENT EXCLUSIVE:
MUMBAI: NPA in the banking system may have peaked
The addition of fresh NPAs to the system this fiscal is expected to be 3% of the total banking sector advances, down from 7.3% in the year
ago period, due to declining special mention accounts (SMA) and standard restructured advances, ratings agency ICRA said.
The Gurugram-based
company also said that 17 to 18 PSU banks may report a loss during this fiscal, as against 19 during FY2017-18, due to higher provision
requirement after resolution of stressed assets.
Based on data compiled for 21 public sector banks and 17 private sector banks, the fresh
slippages during the quarter ended June ’18 stood at Rs 92,000 crore, an annualised rate of 4.7%, which is higher than ICRA’s prediction
However, the agency said that it expects the rates to moderate further in the coming quarters.
The forecast is based on the reducing
percentage of SMA-2 accounts and standard restructured advances in the system, said Anil Gupta, Vice President and Sector Head of Financial
“The share of SMA-2 loans have reduced to 1% as of March 2018 from as has 2% in September 2017 and 4% in December 2016.”
SMA-1 and SMA-2
accounts are the ones where the interest remains unpaid for 31 to 60 and 61 to 90 days, respectively, post which they get labelled as
non-performing assets (NPA).
Meanwhile, standard restructured advances, or loans that replace the outstanding balance on an old loan with a
reworked repayment agreement, stood at 0.55%, down from 1.1% in March 2018.
The ratings agency also pointed that the June quarter was the
first instance in 18 quarters when the gross NPA in the system saw a downward trend
“The gross NPAs declined to Rs 10 lakh crores as of June 30th, 2018 or 11.5% as compared to Rs 10.23 lakh crores or 11.68 % as of March
2018,” the senior executive said.
As ET reported earlier, banks made record recoveries and upgradation during the June quarter due to
ICRA said that the trend will continue this quarter, especially with the imminent resolution of the two large accounts of Bhushan Power and
However, they warned that the haircuts on these accounts could be higher than the provisions made by the banks.
ICRA said that under these
circumstances, up to 18 PSBs may report losses this year
The loss estimates ranged from an optimistic Rs 42,000 crore to as high as 1 lakh crore under the worst-case scenario, Gupta said
In case of higher losses, the government might have to increase the capital allocation to bail the banks out
PSBs have already reported a combined loss of Rs 24,000 crore during the June quarter.
Meanwhile, the agency expected the profitability of
private banks to improve.
