Banks’ gross NPAs may rise to Rs 9.5 lakh cr by March: Assocham-Crisil Study

The bad loan pile-up in the banking sector may swell to Rs 9.5 lakh crore by March-end, up from Rs 8 lakh crore in the year-ago period, says a joint study by Assocham and Crisil released on Monday.

CHENNAI:The bad loan pile-up in the banking sector may swell to Rs 9.5 lakh crore by March-end, up from Rs 8 lakh crore in the year-ago period, says a joint study by Assocham and Crisil released on Monday.

According to the study, which pegs the quantum of stressed assets at Rs 11.5 lakh crore by March, this gives a good opportunity for asset reconstruction companies (ARCs), which are important stakeholders in the NPA resolution process. However, it said that the growth of ARCs is expected to come down significantly owing to capital constraints.

“While growth (of ARCs) is expected to fall to around 12 per cent by June 2019, the AUM (assets under management) are expected to reach Rs 1 lakh crore, and that is fairly sizable,” it noted.Meanwhile, minister of state for finance Shiv Pratap Shukla had said in Parliament earlier that gross NPAs of banks crossed Rs 8.5 lakh crore at the end of September 2017.

“Year 2018 would see a structural shift in the stressed assets’ space as increased stringency in banks’ provisioning norms for investments in security receipts is likely to result in more cash purchases,” the report said.The report further noted that with banks expected to make higher provisioning over and above the provisions made for stressed assets, they may sell the assets at lower discounts, thus increasing the capital requirement. Since the existing capital base of ARCs will not support in absorbing stressed assets available in the market, they are expected to be a part of the multi-platform business model with co-investors/large funds to bring in capital and stay relevant, it said.“The recovery rate, which is a good indicator of the effectiveness of ARCs, is expected to rise from 38 per cent earlier to 44-48 per cent,” it added.

Stressed assets

The analysis of 50 stressed assets — forming nearly 40 per cent of the total bad loans, revealed that sectors like metal, construction and power account for nearly 30 per cent,25 per cent and 15 per cent of the stressed assets, respectively

Related Stories

No stories found.
The New Indian Express
www.newindianexpress.com