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'Gross NPAs of banks to cross Rs 10 lakh Cr by March 2022'
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SME Times News Bureau | 14 Sep, 2021
The gross non-performing assets (GNPAs) of banks are expected to cross
Rs 10 lakh crore by March 2022, a ASSOCHAM-Crisil joint study had said.
"NPAs
are expected to rise to 8.5-9 per cent by March 2022, driven by
slippages in retail, micro, small and medium enterprise (MSME) accounts,
besides some restructured assets," according to the study titled,
'Reinforcing the code,' conducted by The Associated Chambers of Commerce
and Industry of India (ASSOCHAM) jointly with credit rating agency
Crisil.
"The effectiveness of the Insolvency and Bankruptcy Code
(IBC) will be tested by the potential spike in NPAs as the standstill on
initiation of fresh insolvency cases for a year ended in March 2021 and
as most of the pandemic-induced policies or measures are unlikely to
be continued," said the study.
The ASSOCHAM-Crisil study also
noted that the expected increase in GNPAs of both banks and non-banks
this fiscal because of the pandemic will provide an opportunity for
players in the stressed assets market through resolution via various
routes, with IBC likely to be the most preferred.
It said that
the GNPAs of banks have declined from the peak seen in March 2018 and
were lower as of March 2021 vis-a-vis March 2020 on account of
supportive measures, including the six-month debt moratorium, emergency
credit line guarantee scheme (ECLGS) loans and restructuring measures.
The
study noted that the current asset quality stress cycle will be
different than that witnessed a few years back. "NPAs then came
primarily from bigger, chunkier accounts. This time, smaller accounts,
especially the MSME and retail segments, are expected to be more
vulnerable than large corporates, as the latter have consolidated and
deleveraged their balance sheets considerably in the past few years."
It,
however, said that while the restructuring scheme announced for MSMEs
and small borrowers should prevent the NPAs from rising too much, there
is an opportunity for stressed asset investors with expertise and
interest in these asset classes.
The study also highlighted that
risk management practices of Indian banks, especially public sector
banks, have scope for improvement. In the past, laws were not in favour
of lenders and allowed erring promoters to exploit the tedious recovery
procedure. This is borne out by the high number of wilful defaulters of
banks.
However, the RBI has tightened norms for such defaulters
and made stressed asset resolution norms more stringent. That, coupled
with increased resolution of large-ticket NPAs under the IBC framework,
have contributed to better recovery of NPAs.
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