The gross non-performing assets (GNPAs) – loans that do not fetch any returns – for Indian banks are expected to cross Rs 10 lakh crore by March 2022, a recent study jointly conducted by industry body ASSOCHAM and credit rating agency Crisil said.
“NPAs are expected to rise to 8.5-9% by March 2022, driven by slippages in retail, micro, small and medium enterprise (MSME) accounts, besides some restructured assets,” the study said.
The study further pointed out that the expected increase in GNPAs for 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 Insolvency and Bankruptcy Code (IBC) likely to be the most preferred.
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.