The rating agency has done analysis of 38 banks, which showed the GNPAs of banks were 9.3% till the December quarter.
The gross non-performing assets (GNPA) of banks likely to rise up to 9.6-9.9%, compared to 9.3% till the December quarter, given the impact of the Covid-19 outbreak, exposures to certain stressed sectors, moderation in the bank credit growth and muted demand scenario, according to a report by rating agency CARE on NPA movement.
The rating agency has done analysis of 38 banks, which showed the GNPAs of banks were 9.3% till the December quarter. “Considering that there has been no substantial improvement in the economy, ageing provisions and coupled with the recent outbreak of Covid-19, the banking sector might witness an adverse impact on credit delivery and asset quality, leading to pressure on capital adequacy,” the report said.
Talking about the situation due to Covid-19, the report said: “ As there is a lockdown imposed within India and the world, both domestic consumption as well as export-oriented industries could be affected due to muted demand.” The report further said that a prolonged disruption could impact the ability of companies, especially micro, small and medium enterprises (MSMEs), from multiple sectors to service their financial obligations, leading to elevated NPA levels. Additionally, employees who have received pay cuts and self-employed people might be affected, and their payment behaviour – especially on personal loans as well as large ticket loans – might get weakened.
The data compiled by CARE showed that gross NPAs of banks showed a declining trend from 9.5% in the June quarter to 9.3% in the September as well as December quarters of financial year 2020. According to report, till the December quarter, the impression was that banks, barring a few of them, had generally turned the corner on NPAs. The data also suggest that aggregate provisions made by the banks have been on an uptrend, even as provisions by individual banks fluctuated.
Cumulatively, provisions have amounted to Rs 9.26 lakh crore starting from the March quarter of FY17 till the December quarter of FY20. The report said that provisions of banks likely to rise in the coming quarters on account of recognition of stressed assets.
The report also says that there will be adverse impact on banks due to recent verdict of the Supreme Court on the telecom sector. Presently, the banks have an exposure of `1.36 lakh crore as on January 31, 2020, towards the telecom sector and the industrial sector, including telecom.