Icra sees banks' asset quality falling further

"While credit growth is pegged at 14.5-16.5 per cent this fiscal, as against 17 per cent last year, the gross non-performing assets (gross NPAs) are likely to cross Rs 2 trillion and reach 3.6-3.8 percent of gross advances by the end of the fiscal, up from 2.8 per cent last fiscal end," says an Icra report 'Banking sector: Concerns on asset quality vitiate' released here today.

The report further warned that standard restructured advances may move up to Rs 3.7-4.2 trillion or a whopping 6.5-7.5 per cent of advances by the end of the fiscal as against Rs 2.3 trillion as on March 31, 2012.

It also says as much as 40-50 percent of the banking sector exposure to power sector may need to be restructured.

It suggested that since the state-run banks have the higher percentage of NPAs, consistent equity infusion by the government to the tune of Rs 16,000-18,000 crore every year for the next six years could help them meet the Basel III capital requirement, provided they are able to mop up the balance equity from the capital markets.

Incremental credit provisions (in relation to average advances) have increased from 0.96 percent in 2010-11 to 1.1 percent in the first quarter of the current fiscal, says the

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