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Web Exclusive | September 2017

2/3rd of stressed loans already recognised as NPAs by banks: CRISIL

CRISIL estimates stressed assets in the banking system to be around Rs 11.5 lakh crore, or approximately 14 per cent of total advances, and does not expect this number to increase significantly over the medium term. That’s because of gradual recovery in the credit quality of corporates driven by higher commodity prices, lower interest rates, improved capital structures, and efficiency gains. About two-thirds of the overall stressed assets in the banking system has already been recognised by banks as non-performing assets (NPAs) as on March 31, 2017.

The stressed assets include both reported gross NPAs and standard assets that are under pressure currently and could deteriorate into NPAs over the medium term. The assets under pressure mostly comprise not-yet-recognised bad loans (recognised as NPA in one bank, but not in others), restructured standard accounts, and stressed assets structured under schemes such as SDR, 5:25 and S4A. CRISIL expects gross NPAs in the banking system to be approximately 10.5 per cent of advances as of March 2018, up from 9.5 per cent as of March 2017. Faster resolution of stressed accounts through the Insolvency and Bankruptcy Code and various structuring schemes, therefore, is critical to improving the asset quality of banks.
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