India financial sector has both the good and the bad news. While on one hand, the corporate credit quality has improved in last four years, or in the Narendra Modi era; the bad news is that non-performing assets (NPAs) may surge up to Rs 11.5 lakh crore. Crisil\u2019s credit ratio (or number of upgrades vs downgrades), which printed at 1.45 times in the second half of fiscal 2018, continues to reflect the improvement in the good loan book but at the same time classification of NPAs after new resolution framework by the Reserve Bank of India could offset reduction in gross NPAs under the IBC law. Crisil estimates bad loans (NPAs) could touch Rs\u00a011.5 lakh crore or 14% of the\u00a0of bank advances as on March 31, 2017. "Fiscal 2019 can be a defining year for Indian\u00a0banking when focus returns to cranking up credit growth and steady operating profitability. Provisioning levels, though, will continue to be high, which would suppress overall profitability," said Krishnan Sitaraman, Senior Director, CRISIL Ratings. Also Read:\u00a0In late night notification, RBI orders immediate and complete overhaul of bank NPA cleanup Since June last year when the RBI recognised first 12 big loan defaulter and then 28 others for resolution under the Insolvency and Bankruptcy Code (IBC), the gross NPA of the banks were supposed to go down but a new framework with a strict deadline would mean the recognition of new NPAs in next six months, which could nullify the progress so far. Some analysts also say the massive\u00a0Rs 2.11 lakh crore bank recapitalisation plan would not be enough after recognition of these new NPAs. On February 12, in a late night diktat, the RBI ordered a complete and immediate overhaul of the NPA resolution process, setting a strict 90-day deadline for classification of defaulting accounts as NPAs and the 180-day deadline for their resolution after which they have to undergo resolution under the IBC. Upgrades have outnumbered downgrades in the good loan book on the back of better financial indicators due to lower capital expenditure (capex) and record equity issuances. Some companies have shown steady improvement in capital structure and debt protection metrics over the past four years. Also Read:\u00a0India\u2019s bad loans to top Rs 11 lakh crore soon? Continued headroom in capacity utilisation across sectors made corporates go slow on the\u00a0capex, even as India Inc raised a record Rs 1.75 lakh crore of equity in the ten months ended January 31, 2018,"\u00a0Somasekhar Vemuri, Senior Director, CRISIL Ratings said. However, except for NPAs, Crisil\u00a0expects\u00a0corporate credit quality to continue recovering on the back of firming up of domestic consumption and global demand, stable operating cycles, and steady commodity prices. Besides, disruptions due to the global trade war, the Goods and Services Tax, and the resolution under the IBC will have a significant impact on the overall financial health of corporates.