By Ankur Mishra
Seventeen banks are likely to have ratcheted up bad loans to the tune of Rs 7 lakh crore on a pro forma basis during the December quarter (Q3FY21). These 17 lenders had disclosed pro forma gross non-performing assets (GNPAs) this quarter due to the Supreme Court’s (SC’s) interim direction for standstill on fresh NPAs. Of Rs 7 lakh crore, these lenders have reported GNPAs of Rs 5.95 lakh crore in the current quarter without counting any fresh slippages. This implies Rs 1.04 lakh crore of bad loans in the system, which is yet to be recognised by the banks. The apex court had earlier directed lenders not to classify fresh non-performing loans from August 31, 2020, till further orders.
While the top six public sector lenders have reported the majority of pro forma NPAs at Rs 5.12 lakh crore, the 11 private lenders have reported pro forma bad loans at Rs 1.88 lakh crore, with Yes Bank reporting the highest among private sector lenders at over Rs 8,000 crore. Similarly, among the PSBs, State Bank of India reported highest pro forma NPAs of over Rs 16,000 crore.
Anil Gupta- sector head, Financial Sector Ratings, Icra, said the asset quality pressures for banks were likely to continue over the next few quarters as the impact of various measures such as emergency credit line guarantee scheme (ECLGS) and the six-month moratorium wanes. “The performance of loans where disbursements have been done under ECLGS will be monitorable apart from the exposures towards working capital borrowings where the funded interest is required to be repaid by March 31, 2021,” he said. The Reserve Bank of India had earlier granted moratorium of six months to borrowers from March 1, 2020. The banking regulator had also permitted lending institutions to convert the accumulated interest on working capital facilities over the total deferment period of six months into a funded interest term loan, which can be fully repaid during the course of the financial year 2021 (FY21).
Care Ratings senior director Sanjay Agarwal said, “We may see some increase in the gross NPA figures of banks in the next quarter, but overall it is likely to be lower than our estimate of 11-11.5% by the end of FY21.” It also depends on the path economy is going to take now, he added.
Last week, RBI had projected India’s gross domestic product (GDP) to contract by 7.7% in the current fiscal (FY21), but expects it to rebound at 10.5% in FY22. Veena Sivaramakrishnan, partner, Shardul Amarchand Mangaldas, said, “The worst in terms of Covid-19 impact is hopefully behind all of us. But the asset quality problem is not the one of pandemic alone.” For the asset quality to improve, there needs to be discipline among the corporates and tightening of lending practices, both of which are changing the ‘set in stone practices’ to a great extent, she added.