Stressed assets may rise to 10 pc of advances by March: ICRA
Mumbai, Feb 1 (PTI) The share of stressed assets, including gross NPAs and restructured assets, could rise up to 10 per cent or more of the total advances by the end of the fiscal, warns a report by ratings agency ICRA.
The total percentage of NPAs and recast loans which stood at 7.5 per cent as of March 2012, is likely to jump to 9-10.3 per cent by March 2013, the agency said in a report released here today.
A majority of the worries will stem from the power sector, which constitute a staggering 30 per cent of the restructured advances, and the future trajectory of the asset ratios will also be determined by it, said the report.
"The likely trajectory that the NPA percentage takes would also hinge on the economic environment and resolution of fuel availability issues on the power generation front and structural reforms on the distribution side," it said.
Meanwhile, commenting on the likely impact on NPAs following the release of revised norms for restructuring of assets and the draft guidelines on NPAs by the Reserve Bank yesterday, ICRA said the standard restructured advances would go down while NPAs would go up drastically.
"The final guidelines on disclosure will reduce the level of restructured advances for most banks, as accounts that have performed satisfactorily would cease to be classified as restructured," it said.
However, despite the downward revision, the amount of restructured assets will be higher than 4.7 per cent reported last March, it stressed.
On the RBI decision to increase provisioning on restructured advances to 5 per cent by March 2015, it said the incremental provisions will now go up only by Rs 2,500-5,000 crore.
"This expectation is based on the view that economic environment will improve going forward, while the structural issues confronting the power sector will see some resolution sooner than later," it said.
The draft NPA guidelines, which would be applicable from 2015, will take the system''s gross NPA ratio up to 6.5-7.5 per cent by June 2015 from 3.6 per cent in September 2012.
"This is so because regulatory forbearance on classification of old restructured advances (except for infra loans yet to achieve operational status) would cease by April 2015," it said.
The tighter norms augur well for investors and analysts, as transparency will enable accurate assessment of the financial health of the lenders, it said.