Banking NPAs at their lowest in 6 years, still higher than comparable economies

MUMBAI: Banks’ gross impaired assets (GNPA) hit a six-year low of 5.9% in March 2022. But India Postcode ratio is one of the highest among comparable countries, says a report. Excluding Russia, which has 8.3% bad credit, every large market has bad credit below India. China has a NPA ratio of 1.8%, while it is 2.6% for Indonesia and 5.2% for South Africa. Most developed economies have NPAs of less than 3%.
According to a report by CareEdgebad debts will continue to decline during the current year due to higher credit growth and the transfer of legacy assets to the National Asset Reconstruction Company (NARCL).

Bad loans in the Indian banking system have soared after the Reserve Bank of India conducted an Asset Quality Analysis (AQR) in 2016. The RBI identified loans that were in default but were not recognized and borrowers were given time. Bad loans peaked at more than 10% of all lending in March 2018 and have since declined following large-scale provisions by banks. Since the RBI conducted the AQR, banks have made over 16 lakh crore disposals of Rs.
A separate report of Motil Oswal he said that new defaults would be checked, which, coupled with healthy recoveries and updates, will result in continued improvement in asset quality across all banks. He added that while it is necessary to monitor the performance of restructured and government-guaranteed loans, overall credit costs are expected to remain under control, helping banks improve their balance sheets. The brokerage house expects a 40% increase in first-quarter 23rd quarter earnings for private banks and 6% for public sector banks.
“Despite continuing decline, India’s NPA ratio is one of the highest among comparable countries. Non-performing loans have declined in advanced economies thanks to continued deleveraging and institutional and government intervention, ”said CareEdge.
The RBI forecasts an improvement in bad loans in a baseline scenario to 5.3% by March 2023 following its stress tests. in any case, the GNPA the ratio could increase in medium / severe stress scenarios and the GNPA ratio could rise to 6.2% / 8.3% respectively.
In terms of the ratio, gross impaired assets are highest for agriculture with 9.4%. “Agricultural GNPA has generally increased due to drought and elections, the advance of loan waivers,” says the CareEdge report. NPAs for industry stood at 8.4% and services at 5.8%. It continued to be the lowest for retail, dominated by home loans, at 1.8%. The restructuring of loans by the entities affected by the second wave of Covid stood at 1.6% of the total advances in December 2021.