Ratings agency Crisil in its half-yearly report on credit movements has said that system wide non-performing asset (NPA) ratios will improve by 180 basis points (bps) to 8.5 percent in March 2020 from FY19 levels on the back of moderation in slippages coupled with recoveries from the bankruptcy resolutions. It also noted that public sector banks (PSBs) will turn more profitable for first time in four years.
According to the report, Indian banking system will close FY19 with gross non NPAs ratio of 10.3 percent. It noted that the credit ratio, which is the ratio of upgrades to downgrades, moved up to 1.81 times in the second half of FY19 from 1.68 times in the first half. It also said that from a quantum of debt perspective, the debt-rated credit ratio moderated to 0.89 times primarily due to two telecom firms slipping. It warned that a slump in advanced economies as well as government spends on infra may lead to a moderation in the credit ratio in FY20.
Crisil further stated that incremental slippages came down to 3.8 percent of total assets in FY19 from over 6 percent levels in the previous two fiscals. It felt that this is slated to help the state-run lenders, who are expected to return to the black after four consecutive years of losses. It added that over 60 percent of total upgrades were in investment-linked and export-linked sectors, which got a fillip from domestic infra spends and global growth.