Bank NPAs to improve to decadal low of 3.8% by FY24 end: Crisil

Mumbai: Banks' gross non-performing assets (NPAs) will reduce further to a decadal low of 3.8 percent by end of FY2023-24, credit rating agency Crisil said on Monday. The agency estimates NPAs to reduce to 4.2 percent by end of the just concluded FY23 as against 5.9 percent in the year-ago period. It had earlier estimated NPAs to come at 4 percent by end of FY24.

Factors influencing bank NPAs

Crisil said that a major factor influencing the bank NPAs is the improvement in the high-value corporate loan books, where the gross NPAs are slated to come below two percent. Corporates have been reducing their leverage through a string of measures, including prepayment of loans as well. Additionally, strengthened risk management and underwriting are also helping the lenders towards lowering the NPAs, the agency said.

Banking sector benefiting from capital infusion

The agency said that the banking sector is better capitalised benefiting from recent capital infusion, but the ability to attract deposits to keep pace with increasing credit growth will be monitorable.

Indian banking sector will be able to handle volatilities

Amid global events, which include some banks in the US going down and frantic actions by regulators in Europe to prevent the contagion, the agency said that the Indian banking sector will be able to handle the volatilities. Among other factors, India has had lower levels of interest rate hikes, healthier bank balance sheets with record low NPAs, depositor-funded liabilities, and better regulations on asset and investment book management, the agency said.

Banking system to maintain loan growth at 15%

The banking system will maintain the loan growth at 15 percent in FY24, the agency said. For the non-banks, it said the assets under management are set to grow and concerns surrounding asset quality are receding. The NBFCs segment will witness a 13-14 percent jump in assets under management to take the overall AUM to Rs 34 lakh crore, it said, adding Rs 70,000 crore of capital infusion into entities in the last few years has helped.

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