India's banking system is likely to witness a surge in restructured assets by a whopping....
India’s banking system is likely to witness a surge in restructured assets by a whopping Rs 60,000-1,00,000 crore over the next five months, according to India Ratings.
Currently, the total bad loans and restructured assets stand at about Rs 6 trillion. Of this around 45 per cent, or Rs 2.55 trillion, is NPAs and the remaining 65 per cent, or Rs 3.45 trillion, is restructured loans.
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“We expect the restructured assets in the banking system to shoot up by another Rs 60,000 crore to Rs 1 trillion over the next five months,” India Ratings Senior Finance Director Deep N Mukherjee said in a report today.
The domestic rating agency has analysed the credit metrics of the top 500 corporate borrowers, with aggregate debt of Rs 28,76,000 crore, which is 73 per cent of the total bank lending to the industry, services and export sectors.
The report said around 82 of these 500 borrowers have already been formally tagged as financially distressed or identified as non-performing assets (NPAs), or their loans have already been restructured.
Another 83, that is 17 per cent of these top borrowers, accounted for 9 per cent of the overall debt (which is Rs 28.76 trillion) and they have severely stretched credit metrics.
Within these 83 corporates, operating profitability barely covers the interest required to be serviced in most cases, and there is also the absence of any strong parent, the report said.
These corporates with severely weak credit metrics have limited expectation of an immediate improvement in profitability.
India Ratings further said potentially one-third to half of these 83 accounts could be in the category of SMA-2 (special mention accounts) with delays in debt servicing ranging between 61-90 days.