The economic slowdown as well as aging of loans will deteriorate the banks’ assets in the next two years, said a report from Crisil, the rating agency. The report also said that the banking sectors’ gross non-performing assets are likely to witness a growth to touch 5 per cent by 2011 as against 2.3 per cent in 2008. The gross NPAs in absolute terms would grew to around three times from the March 2008 level of Rs 55,000 crore to Rs 1.9 lakh crore. This rise in NPA include the demand slowdown as well as lack of funding, lengthy working capital cycles and foreign exchange rate fluctuation, said Mr Tarun Bhatia, Head, Finance Sector Ratings, Crisil.
However, in the retail front, the gross NPAs are likely to reach 4.7 per cent by March 2011 from 3.2 per cent in March 2008. But the impact will be limited as most of the banks as well as financial entities have not increased their incremental exposure to unsecured loans portfolio, the report said. The bottom line of the banking sector will have a negative impact due to increase in defaults cases but with the banks having to keep aside about 25-40 per cent of their profits as provisions for their non-performing assets this fiscal, Mr Bhatia said.
However, in the retail front, the gross NPAs are likely to reach 4.7 per cent by March 2011 from 3.2 per cent in March 2008. But the impact will be limited as most of the banks as well as financial entities have not increased their incremental exposure to unsecured loans portfolio, the report said. The bottom line of the banking sector will have a negative impact due to increase in defaults cases but with the banks having to keep aside about 25-40 per cent of their profits as provisions for their non-performing assets this fiscal, Mr Bhatia said.
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