Rs 5 Lakh Crore NPAs Added in FY18

Crisil, the credit rating agency has declared an outstanding of 5 lakh crore worth of banks loans have been turned into non-performing assets (NPA) in fiscal 2018. Thus the total slippages in the past three fiscals is now a total of Rs 13.6 lakh crore.

Rs 5 Lakh Crore NPAs Added in FY18
Burden Of NPA

A fifth of the slippages last fiscal was due to withdrawals the structuring schemes by the Reserve Bank of India in February 2018, which was after a very important process of the Insolvency and Bankruptcy Code (IBC) was initiated.

Thus the gross NPAs increased!

However, with special mention accounts reducing and better NPA recovery it seems to be improving.

SMA-2 account, which is a stressed account where the principal or interest payment or any other amount, wholly or partly, is overdue between 61 and 90 days has seen to be halved. Since last fiscal end, it has halved to 0.8% thus showing that stressed loans are now not being turned into NPAs.

Krishnan Sitaraman, Crisil Senior Director commented on this issue stating, “Further, prospects of recovery from stressed accounts referred to the National Company Law Tribunal (NCLT) are improving. More than a quarter of the ₹3.3-lakh crore worth of cases referred to NCLT for resolution is from the steel sector, which has seen heightened bidding interest due to improving prospects for the sector.”

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Crisil is ready for gross NPAs to increase at around the range of 11.5% but then start reducing.

NPAs tend to lead to net losses of the banking system. The last fiscal, for example, the banking system reported a net loss of 40,000 crore due to this problem.

Public Sector Banks were affected drastically with provisioning costs hitting them twice as bad.

Rama Patel, Crisil Director, “The banking system’s provisioning cover (excluding write-offs) for NPAs increased to 50 percent as on March 31, 2018, against 45 percent a year ago; this is expected to improve this fiscal.”

PSBs are thus relying on the government for support, to ensure Basel III norms are met.

In other news regarding NPA’s, in a major relief to Micro, Small and Medium Enterprises, the Reserve Bank today eased NPA classification norms for such units facing input credit linkages and associated issues under the Goods and Services Tax.

“In continuation of support and relief to MSMEs, NPA recognition for GST and non-GST MSMEs is now at 180 days for dues up to December 31, 2018,” Rajiv Kumar, Financial Services Secretary said.