Banks to witness bad loans falling to a low of 4% by FY24 end

Sep 21, 2022 08:00 pm

Indian banks are likely to see a 90 basis points fall in gross non-performing assets (NPAs) to 5% in this fiscal year to March and further improve to 4% by end of March 2024, rating agency Crisil said on Wednesday.

The key indicator of banks' asset quality is likely to improve, "riding on post-pandemic economic recovery and higher credit growth," the agency said in a statement.

Loans (INLOAN=ECI) of Indian banks jumped 15.5% in the two weeks to Aug. 26 from a year earlier, while deposits (INDEP=ECI) rose 9.5%, latest Reserve Bank of India data showed.

The asset quality of the banking sector will also benefit from the proposed sale of NPAs to the National Asset Reconstruction Company Ltd (NARCL), the agency said.

"The steady improvement in corporate asset quality is clearly reflected in leading indicators such as the credit quality of bank exposures," said Krishnan Sitaraman, senior direct and deputy chief ratings officer at Crisil Ratings.

A study of large exposures of banks, constituting more than half of corporate advances, showed the share of high-safety exposures has increased to 77% as on March 2022 from 59% in March 2017, while those to sub-investment grade companies more than halved to 7% versus 17%, Crisil noted.