Even including the pro forma GNPA of Rs 1.3 lakh crore (1.1% of gross advances) and the NNPA of Rs 1 lakh crore (1% of net advances), the GNPA and NNPA of banks stood at 8 , 3% and 2.7%. as at December 31, 2020 compared to 8.6% and 3% respectively as at March 31, 2020.
However, this decline was caused by loan cancellations of Rs 1.1 lakh crore (1 percent of advances) during 9M FY21. In addition, on the basis of restructuring guidelines given by various banks, the overall volume of restructured advances is estimated at 1.3 to 1.5 percent of advances, which is much lower than initial estimates by ICRA.
“While the asset quality and restructuring figures are encouraging, they do not reflect the underlying tensions over banks’ asset quality,” said Anil Gupta, head of the financial sector ratings sector at the Bank. ‘ICRA. “The level of loans in the overdue categories increased after the lifting of the moratorium and the impact on the quality of assets will be spread over fiscal years 21 and 22, as various interventions and relief measures have prevented a significant one-off hit on bank profitability and capital. “
Despite the impact of the Covid-19 pandemic on borrowers’ debt service capacity, the new gross slippages for banks were well below Rs 1.8 crore lakh (2.7% of advances on an annualized basis ) during 9M FY2021 compared to Rs 3.6 crore lakh (4.1 percent) in FY 20. This was motivated by various relief measures such as the moratorium on loan repayments, the status quo on asset classification and extended liquidity to borrowers with secured emergency line of credit.
As the impact of these interventions wears off, pressures on asset quality are likely to resurface. ICRA expects GNPA (excluding depreciation) to decrease from 9.6 to 9.7% by March 31, 2021 and from 9.9 to 10.2% by March 31, 2022, compared to 8.6% as of March 31, 2020.