Banks NPA will come down to 5.5% by March-2024, interest rates and inflation risk will be limited
Highlights
- It was estimated in the report of S&P Global Ratings
- Also, there is an expectation of improvement in NPA recovery.
- GDP expected to grow by 6.5 to 7 percent annually
Banks NPA: The non-performing assets (NPA) ratio of banks will come down from five to 5.5 per cent of total loans by March 2024. This has been estimated in the report released on Thursday by S&P Global Ratings. According to the latest Financial Stability Report of the Reserve Bank of India (RBI), the total non-performing assets (GNPAs) of banks declined to a six-year low of 5.9 per cent in March 2022. The rating agency said in the report, we estimate that the bad loans of banks will come down to 5 to 5.5 percent by the end of March 31, 2024. Similarly, we expect the cost of credit to normalize to 1.5 per cent in the current financial year. It will further come down further to 1.3 per cent.
Expected improvement in NPA recovery
The rating agency said the small and medium-sized enterprises sector and low-income households are affected by rising interest rates and high inflation, but these risks will remain limited going forward. The report said that with the increase in economic activity, the pressure that is still left in this sector will start to decline. Along with this, improvement in NPA recovery is also expected. According to the report, India’s economic growth prospects may remain strong in the medium term. The GDP is expected to grow by 6.5 to seven per cent annually between fiscal years 2022-23 to 2025-26.
Transfer of NPA accounts possible from next month
According to the Finance Ministry, the National Asset Reconstruction Company (NARCL) or bad bank with a size of Rs 6,000 crore is expected to acquire the first set of non-performing assets (NPAs) of banks next month. The government has constituted NARCL as a Special Sponsorship Asset Reconstruction Company to take over bank NPA accounts of size above Rs 500 crore. NARCL has shareholding of 15 Indian lenders and Canara Bank is the sponsor of this asset reconstruction company.
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