Micro, small and medium enterprises (MSMEs) could turn out to be the next stress area for banks, with many lenders and analysts worried about loans given under the Emergency Credit Line Guarantee Sche
Asset quality pressure on banks in India is likely to moderate with net non-performing assets (NPAs) declining to 2.5 per cent by March 2022 (FY22) from an estimated 3.1 per cent in March 2021, according to rating agency Icra. The loan restructuring volume is likely to be lower at 2.5-4.5 per cent of advances than initial estimates of 5-8 per cent of advances, it added. Icra said in a statement that moratorium on loan repayments is over, though the Supreme Court directive on asset classification is awaited. In this backdrop, the Gross NPAs are likely to rise to 10.1-10.6 per cent by March 2021 from 7.9 per cent in September 2020.
‘Bank profitability may rise in FY22 on better asset quality’
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NPAs may climb in near future: ICRA
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NPAs may climb in near future: ICRA
Improved asset quality and consequently lower credit provisions could drive better profitability next fiscal for banks, ICRA Ratings said in a report. It added that this would provide an impetus to lenders as well as rejuvenate their lending decisions.
Low interest rates, improved business volumes, better job prospects and income levels could also stimulate credit demand next year, it added.
“This, coupled with better competitive positioning of banks vis-a-vis other lenders driven by steep decline in cost of deposits could improve bank credit growth to 6-7% in FY2022 from an estimated 3.9-5.2% in FY21 and 6.1% in FY20.” ICRA said.