Most banks see gross NPA ratio at 3-3.5% in next 6 months, eye credit growth: FICCI-IBA Survey
Upstox
2 min read • Updated: March 21, 2024, 4:36 PM
Summary
The gross NPA or bad-loan ratio of banks is expected to come in the range of 3-3.5% in the next six months, as per a survey conducted by FICCI and IBA among 23 banks, who represent 77% of the banking industry in terms of their asset size. The lenders who participated in the survey also were optimistic on long-term credit growth, with 41% among them seeing a 12% credit growth in the non-food industry segment.
The gross non-performing asset (NPA) ratio is expected to come in the range of 3% to 3.5% in the next six months, according to most of the banks surveyed by the Federation of Indian Chambers of Commerce & Industry (FICCI) and the Indian Banking Association (IBA).
"A large majority (56% each) of public sector and private sector bank respondents expect gross NPAs to be in the range of 3% –3.5%," stated the survey, whose findings were released on Thursday, March 21.
In comparison, only 33% of the responding foreign banks expect NPA levels to be in the range of 3-3.5%. The survey was conducted among 23 banks that represent about 77% of the banking industry, as classified by asset size.
Notably, the gross NPA or bad-loan ratio of Indian banks came in at 3.2% in September 2023, down from 3.9% in March 2023, as per the RBI Financial Stability Report released last year.
The banks who participated in the FICCI-IBA survey said their asset quality prospects are strong, "cushioned by policy and regulatory support".
The responding public sector banks reported a 100% decrease in their gross NPAs over the past six months. In comparison, the private lenders who participated in the survey reported a 67% decrease in the bad loan ratio.
The respondents, however, said some of the sectors that may continue to flag NPAs over the next six months include textiles and garments, agriculture and gems and jewellery.
Credit growth
The surveyed banks claimed that long-term credit growth is set to increase, with the most optimistic outlook shared for the non-food industry.
While 41% of the participating banks expect non-food industry credit growth to be above 12%, around 18% feel that the growth would be in the range of 10-12%, the survey said. Meanwhile, another 36% of the respondents are of the view that credit growth in this segment would hover around 8–10%, the survey said.