Banks see gross NPAs at 3-3.5% in next 6 months: FICCI survey

Posted on by

A majority of the 23 banks surveyed in the latest edition of FICCI-IBA Banjers’ Survey expect their gross non performing assets (NPAs) as a percentage of advances to range between 3-3.5 per cent in next six months.

Respondent banks were more sanguine about the asset quality prospects in the current round of the survey, cushioned by policy and regulatory support and this was reflected in the survey results, according to industry chamber FICCI. 

The eighteenth round of the FICCI-IBA Bankers’ survey was carried out for the period July to December 2023.

It maybe recalled Indian banks had achieved a new decadal low in the gross non-performing asset ratio to 3.2 per cent as of September 2023, following a decline from 3.9 per cent at the end of March 2023, as per the RBI Financial Stability Report. 

Over half of the respondent banks in the current round believe that Gross NPAs would be in the range of 3– 3.5 per cent over the next six months. About 14 per cent respondents are of the view that NPA levels would be in the range of 2.5 – 3 per cent.

NPA risk 

There has been a mixed response with respect to sectors identified with high NPA risk over the next six months, by participating bankers in the current round of survey.

Over half the respondent banks expect NPAs in the Textile and Garments sector to increase in the next 6 months while 43 percent of the respondents expect NPA risk to remain unchanged in the next six months.

MSME was reported as another high NPA risk sector by participating bankers. About 38 percent respondents expect NPAs to increase in this sector in the next 6 months while 33 per cent of the respondents expect NPA risk to remain unchanged in the next six months.

About 33 percent respondents expect NPAs in the Agriculture sector to increase in the next six months, an increase compared to the previous round where 29 per cent of the respondents cited Agriculture to pose higher NPA risk.

Twenty-three Banks responded to the survey, representing a mix of public sector, private sector and foreign banks. Together, these banks constitute about 77 per cent of the total banking asset size.

Credit Demand

The survey findings show that long term credit demand has seen continued growth for sectors such as Infrastructure, Metals, Iron and Steel, Food Processing. Infrastructure is witnessing an increase in

credit flow with 82 per cent of the respondents indicating an increase in long term loans as against 67 per cent in the previous round. The survey suggests that the outlook for non-food industry credit over next six months is optimistic with 41 per cent of the participating banks expecting non-food industry credit growth to be above 12 per cent while 18 per cent feel that non-food industry credit growth would be in the range of 10-12 per cent. About 36 percent of the respondents are of the view that non-food industry credit growth would be in the range of 8-10 per cent.