Mumbai: Non-Performing Assets (NPA) Banks tend to increase to 8-9% in FY22 from 7.5% in March 2021, driven by default in the retail segment and small businesses.
However, the increase in 50-150 basis of this point (100bps = 1 percentage point) will still be lower than the peak of 11.2% in March 2018 and 9.1% in March 2019 because the corporate sector continues to be tough.
According to a report by Crisil, Covid assistance measures such as the dispensation of restructuring and the Emergency Credit Line Guarantee Scheme (ECLGS) will help limit the increase.
With around 2% of bank loans expected in restructuring at the end of this fiscal and stress assets – consisting of dirty NPA and loan books in restructuring – must touch 10-11%.
“Retail and MSME segments, who together form around 40% of bank loans, are expected to see higher NPA add and stress assets this time.
Stress assets in this segment are seen up to 4-5% of the last 3% fiscal and 17-18% of about 14%, with this fiscal end.
The numbers will make it tend to be higher but for removal, especially in the unsecured segment, “said Senior Director of Crisil’s ranking, Krishnan Sitharaman.
According to Crisil, the retail segment, which has a relatively stable range over the past decade, has been stated by a pandemic with salary and self-employed borrowers who face significant income challenges and higher medical costs, especially in the second wave.
Apart from the steps, the crime rank believes stress assets in the retail segment will rise.
While home loans, the biggest segment, will be the least affected loan, unsecured expected to bear the burden of the pandemic.
The MSME segment is likely to see the quality of assets deteriorate and will require restructuring to manage cash flow challenges.
Crisil expects 4-5% of the MSME loan book to be restructured, which leads to stress asset leap to 17-18% by this fiscal end.
Like this, only 1% of the corporate loan book is expected to undergo restructuring.
The rural segment, which was hit harder during the second wave of pandemic, has also seen strong recovery.
Therefore, stress assets in the agricultural segment are expected to remain relatively stable.
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