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  3. Net NPAs of banking sector likely to improve to 3.2% by FY20 end: ICRA

Net NPAs of banking sector likely to improve to 3.2% by FY20 end: ICRA

27 Dec 2019 Evaluate

Rating agency ICRA said in its latest report has said that overall net non-performing assets (NPAs) of the banking sector are likely to improve to 3.2-3.3 per cent by the end of this fiscal (FY20) from 3.8 per cent in FY19 on account of better recoveries and declining slippages. A report stated that the asset quality for the banking sector continues to improve with declining slippages and expected improvements in recoveries during FY20 even though loan write-offs continue to remain at elevated levels.

It mentioned that the decline in net NPAs will improve the solvency profile of banks, with core equity bettering to around 29 per cent by March 2020 and nearly 27 per cent by March 2021 from 33 per cent as on September 30, 2019. The report said with sizeable capital infusion in public sector banks and accelerated provisions, their NNPAs declined sharply to 4.8 per cent as on September 30, 2019 from 7.2 per cent as on September, 2018 and 4.9 per cent as on March 31, 2019.

Private lenders net NPAs improved to 1.7 per cent as on September 30, 2019 from 1.9 per cent as on September 30, 2018, but were marginally higher than 1.6 per cent as on March 31, 2019. The report said with reduction in net bad loan levels, credit provisions for banks are expected to decline to 1.6-1.8 per cent of advances in the current fiscal and 0.8-0.9 per cent during FY2021 from 3.6 per cent during FY2019. The decline in the credit provisions will largely be driven by state-run banks with their provisioning declining to 2.1-2.3 per cent in FY2020 and to 1-1.1 per cent in FY2021 from 4.4 per cent during FY2019.

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