Bank NPAs may inch up on stressed retail, MSME segments, says Crisil
Gross non-performing assets (NPAs) of banks will rise to 8-9% this fiscal, well below the peak of 11.2% seen at the end of fiscal 2018, the rating agency said in a report.
Would the asset quality of banks deteriorate due to stress in the MSME and retail segment? Rating agency Crisil believes that gross NPAs of the bank could reach 8-9% by March 2022 due to increased stressed assets in the retail segment.
Gross non-performing assets (NPAs) of banks will rise to 8-9% this fiscal, well below the peak of 11.2% seen at the end of fiscal 2018, the rating agency said in a report. It, though, feels that the Covid-19 relief measures such as the restructuring dispensation, and the Emergency Credit Line Guarantee Scheme (ECLGS) would help limit the rise (in NPA).
However, it foresees that with around 2% of bank credit expected under restructuring by the end of this fiscal, stressed assets — comprising gross NPAs and loan book under restructuring — should touch 10-11%. Krishnan Sitaraman, senior director and deputy chief ratings officer, Crisil Ratings, says that stressed assets in retail and MSME segments, which together form 40% of bank credit, are likely to increase to 4-5% and 17-18%, respectively, by the end of the current financial year.
According to the Reserve Bank of India (RBI), the asset quality of banks improved during 2021- 22 (up to June), with the overall NPA ratio declining to 7.5% in June 2021 from 8% a year ago. The NPA ratio, however, in respect of retail loans and services increased over the same period.
Moody’s positive on asset quality ”The quality of corporate loans has improved, indicating that banks have recognised and provisioned for all legacy problem loans in this segment. The quality of retail loans has deteriorated, but to a limited degree because large - scale job losses have not occurred,” Moody’s said in its report.