The survey indicated that sectors like agriculture, textiles and garments, MSMEs, and gems & jewellery might continue to exhibit NPAs over the coming six months.
According to the FICCI-IBA survey, lenders anticipate an improvement in overall asset quality over the next six months but have highlighted risks of high Non-performing Assets (NPA) in sectors such as textiles, food processing, and infrastructure.
For the January to June 2024 period, approximately 76 per cent of respondents identified the textile sector as having high NPA levels. This was followed by 59 per cent reporting high NPAs in infrastructure, and 53 per cent noting a high incidence of bad loans in food processing.
The survey indicated that sectors like agriculture, textiles and garments, MSMEs, and gems & jewellery might continue to exhibit NPAs over the coming six months.
Bankers noted that these sectors diverge from the overall trend. The adverse international markets have affected the repayment capacity of some textile and garment units, and sector-specific conditions are expected to improve gradually.
The survey, conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Indian Banks’ Association (IBA), included 22 banks, representing about 67 per cent of the banking industry by asset size. The respondent banks remained optimistic about asset quality prospects, supported by policy and regulatory measures.
Over half of the respondent banks believe that Gross NPAs will range between 2.5-3 per cent over the next six months.
The Financial Stability Report from the RBI, released at the end of June, indicated that scheduled commercial banks’ gross NPA was at 2.8 per cent, and net NPA was at 0.6 per cent as of the end of March 2024.
Respondent bankers cited factors such as a resilient domestic economy, upgraded credit assessment, continuous credit monitoring, lower slippages, high write-offs, and a healthy capital position as reasons for expecting further improvement in asset quality over the next six months.
The FICCI-IBA survey also observed that the Indian economy and banking sector remain robust and resilient. With improved balance sheets, banks are supporting economic activity through sustained credit expansion. However, the survey noted that credit growth is surpassing deposit growth, which may lead to liquidity challenges for the banking system. Efforts to raise deposits to match loan growth are underway.
News source: Business Standard