Bad lenders fall to decade low of 4% at end of fiscal 24

MUMBAI: Indian banks are likely to see total underperforming assets (NPA) drop by 90 basis points to 5% in this financial year to March and improve further to 4% by the end of March. 2024, rating agency Crisil said Wednesday.
The key indicator of banks’ asset quality is likely to improve, “based on the post-pandemic economic recovery and higher credit growth,” the agency said in a statement.
Loans by banks rose 15.5% in the two weeks to August 26 from a year earlier, while deposits rose 9.5%, the latest Reserve Bank of India data Degree shows.
The property quality of banking sector would also benefit from the proposed sale of NPA to 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 the company,” said Krishnan Sitaraman, direct ratings director and senior vice president at Crisil Ratings. bank debts.
A study of banks’ high-risk ratios, which account for more than half of corporate growth, found that the high-risk ratio rose to 77% in March 2022 from 59%. in March 2017, while the ratio was more for sub-capital firms than Crisil notes.
The improvement in asset quality in the corporate segment follows a significant cleanup of bank books in recent years, while strengthening risk management and underwriting.
Meanwhile, the retail segment remains resilient and gross profit is expected to remain at 1.8-2.0% over the medium term, Crisil pointed out.
“While the impact of rising interest rates and inflationary pressures on individual borrowers’ cash flows will need to be monitored, nearly half of retail loans are home loans, where borrowers have a relatively better credit profile”.
“Over the medium term, to avoid a repeat of past asset quality challenges, it is important that banks do not relax credit guarantee standards while focusing on faster growth,” it said. said more.

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