Indian banks are expected to see an increase in gross non-performing assets (NPA) to 8-9% of total loans by the end of this fiscal year, from 7.5% last year, ratings agency CRISIL said on Tuesday. in a report.
The increases will be led by retail clients and the micro, small and medium (MSME) segments, said Krishnan Sitaraman, senior director and deputy director of rating, noting that they represent 40% of total bank credit.
“Live assets in these segments are expected to grow to 4-5% and 17-18%, respectively, by year-end (March 2022). The numbers would have been even higher without the write-offs, mainly in the segments, ”Sitaraman said.
Last year, the Reserve Bank of India (RBI) allowed banks to offer a six-month moratorium to all small borrowers.
It then enabled lenders to offer a one-time loan restructuring facility to help avoid the build-up of bad debt and to give borrowers more time to repay their debt.
Despite these measures, stressed assets in the retail segment will increase, with home loans, which is the largest segment, the least affected and unsecured loans the worst, CRISIL said.
The corporate segment is expected to be more resilient as much of the stress in the corporate portfolio has already been recognized in an asset quality review initiated by the RBI in 2015, CRISIL said.
The agency said the performance of the restructured portfolio will require close monitoring, but slippages in the restructured book are expected to be lower this time around.
“Recent trends indicate that a reasonable proportion of borrowers, mostly from the personal side, have started making additional payments as their cash flow improves,” said Subha Sri Narayanan, director of CRISIL Ratings.
“MSMEs, however, may take longer to stabilize and we remain vigilant.”