Leading rating agency, Crisil anticipates that the ongoing downturn the gross non-performing assets (NPA) in the retail loan portfolio ? currently estimated at Rs 1 lakh crore of Indian banks ? would rise from around 3% to 4% by the end of the current financial year.
The total lending portfolio of the country?s banking sector is currently pegged at Rs 5 lakh crore.
Tarun Bhatia, head, financial sector ratings, Crisil said, ?The asset quality deterioration of retail loans will not precipitate a crisis, but some lenders could suffer significant losses. However, housing portfolio, that comprises around 50% share of the country?s total retail advances, is not expected to witness a phenomenal rise in delinquencies since in India, nobody likes to default on home loans. Also, over the past few years, the housing prices across the country have appreciated a lot.?
Bhatia said that retail credit growth in India is expected to grow at 12-13% in the current fiscal ? a 17-20% dip from the phenomenal retail credit growth the country witnessed before five years.
?The corporate credit growth in some sectors like real estate, auto etc is also likely to face a downward pressure in the current year. Overall corporate credit quality and growth may deteriorate. However, no defaults are likely to happen in the Indian corporate sector.?
Crisil states that recent controversies surrounding the recovery methods adopted by some lenders, and the guidelines prescribed by the Reserve Bank of India(RBI) for recovery agents, have compelled players to reassess their business models for unsecured assets.
The dominant players have significantly slowed down operations in the small ticket personal loans segment.
The limited access to organised funding may drive low-income borrowers to turn to moneylenders. It will be detrimental to the policy goal of larger financial inclusion.