Bundles of Indian one hundred rupee bills are pictured at a bank in Mumbai, India (Photographer: Abhijit Bhatlekar/Bloomberg News.)  

Bank NPAs Fall To 9.3% In 2018-19, Crisil Says

Non-performing assets in the country’s banking industry declined more than Reserve Bank of India’s expectation for 2018-19, ratings agency Crisil said in a report released Monday.

“System-wide NPAs have declined in 2018-19 to 9.3 percent as of March 31, 2019 after tripling to 11.5 percent in the four fiscals till March 2018,” Crisil said. In its half-yearly financial stability report in December, RBI had estimated that gross NPA ratio to improve to 10.3 percent by March 2019 from 10.8 percent in Sep. 2018.

The report comes at a time when most banks are at the cusp of an end to a prolonged bad loan cycle and are concentrating on the resolution now.

“In a sign of possible recovery from the impaired asset load, the gross NPA ratio of both public and private sector banks showed a half-yearly decline, for the first time since March 2015, the financial year prior to the launch of asset quality review by the RBI,” Crisil said.

Bad loan recognitions accelerated largely due to a nudge from RBI, which wanted bank balance sheets to reflect a true picture of stress. The central bank’s asset quality review led to a massive spike in NPAs, and was supported by the enactment of the bankruptcy law for resolving the cases.

However, progress in bankruptcy cases has not been very fast as the legal provisions keep getting challenged frequently and lack of precedents results in delays in arriving at resolutions due to legal tangles.