Credit ratings agency, Crisil Ratings in its latest report has said that public sector banks (PSBs) will narrow down their losses to Rs 500 billion in the financial year 2019 as compared to Rs 850 billion in the previous fiscal year, as the quantum of dud loans reduce. It pointed out that as a result of the high provisioning requirements, many state-run lenders' will continue to report losses for the third consecutive year, though the extent of this will be lesser at Rs 500 billion.
According to the report, profits for the entire banking system are expected to start improving from the second half of this fiscal and turn positive for the whole fiscal, as most large private banks are expected to report profit. It indicated that at present, the gross non-performing asset (NPA) ratio of the PSBs is at 14.7 percent, compared with 4.7 percent for the private sector ones.
The ratings agency further said that the provisioning for bad assets is expected to stay elevated at Rs 2.8 trillion for the system, attributing it to ageing of already identified NPAs and also the money to be set aside for the second list of 26 assets to be resolved under the bankruptcy law. It added that the fresh slippages are reducing and it is troubles of the past which is leading to the elevated provisioning.