Close to 35-40% of restructured loans could slip into the non-performing asset (NPA) category, rating agency Icra said on Monday. “We think that the slippages from the restructured advances could be 35-40%,” said Vibha Batra, senior vice-president, Icra.
Batra added that gross NPAs in the system may jump up to 5.9% this fiscal from 4.4% despite economic growth because of lagged recognition of bad assets, which is resulting in slippage of more restructured accounts into dud loans.
“Reported gross NPAs will increase in FY16 with withdrawal of regulatory forbearance for restructured advances from FY16 to 5.3-5.9% by March 2016 against 4.4% as in March 2015,” the agency said in a note. On slippages, Batra said data published by the CDR Cell reveals that 25-30% of loans that were restructured during FY10-12 failed and exited from CDR Cell. “This percentage is lower for restructuring done over last two years, because the accounts may still be under moratorium,” she said.
CDR data showed that, since inception, the cell has approved cases worth Rs 4 lakh crore, out of which recast packages of Rs 56,995 crore have failed and exited the cell. She explained that the accretion to restructured advances has been more than Rs 1.5 lakh crore every year over the last three years; so, these are the accounts that are not reflected in the gross NPAs. “So, if we were to look at the FY15 data, 25% of the slippages came from the restructured book,” she added.
For instance, private sector lender ICICI Bank added NPAs of Rs 3,260 crore in Q4FY15, but out of that, the slippages from the restructured book were worth Rs 2,246 crore.
“Most of the addition that has happened to the NPA during the quarter was mainly on account of the slippages from restructured assets and not really new problem assets,” ICICI Bank MD & CEO Chanda Kochhar had said.
Batra said to see how the pool of restructured advances are going to behave, one should look at the fresh restructuring through the CDR cell, which is a third of the total restructured advances of the banking system. She said fresh NPA generation of the banking system would depend on how issues are addressed in infrastructure, construction and steel sectors.