Mumbai : Asset quality woes of banks will continue in the current fiscal with gross non-performing assets (NPA) ratio for the system growing at 0.20 per cent to 4.5 per cent by March 2016, credit rating firm Crisil said.
Even though restructuring has been discontinued, the newly introduced 5/25 scheme for infrastructure loans will act as a “mask” for the stress, it said, pointing to potential issues around transparency. The scheme allows banks to refinance or sell long-term project loans after every five years. For banks to avail such a facility, the loan tenor cannot be more than 25 years.
Crisil said banks may not report such loans unlike the restructured advances. “We believe that the asset quality challenges will persist in the current year,” Crisil director Rajat Bahl told reporters on a conference call.
He said both the disappearance of the regulatory forbearance of restructuring as well as slippages from the previously recast loans will weigh-in on the asset quality.
The agency estimated that the ‘stressed assets’, which it defines as the GNPA plus loans sold to asset reconstruction companies and estimates of loans turning bad under 5/25 scheme (15 per cent) and already restructured assets (35 per cent), to stay flat at 6 per cent (Rs 5.3 trillion) in FY16.
Crisil expects Rs 80,000 crore of assets to get transfered under the 5/25 scheme for infrastructure loans introduced last year to take care of the asset liability mismatches for the system. A bulk of the asset quality woes in the recent past has been attributed to trouble with infra loans.
With the greater amount of provisioning that such stressed assets will require, the agency said the banks will also suffer on the profitability front.
It said private banks, which have a better leash on asset quality due to composition of assets, will overtake the state-run lenders on profits at an aggregate level.
