While expecting overall asset quality to improve over the coming six months, lenders have flagged risks of high non-performing assets (NPA) in sectors like textiles, food processing, and infrastructure, according to the FICCI-IBA survey.
In the survey, for the January to June 2024 period, about 76 per cent of respondents cited textiles as a sector with high NPA levels. This was followed by 59 per cent of them reporting infrastructure and 53 per cent identifying food processing as a segment with a high incidence of bad loans.
“Some of the sectors that may continue to show NPAs over the next six months include agriculture, textiles and garments, MSMEs, and gems & jewellery,” said the survey released today.
Bankers said these sectors stand out from the overall trend. The adverse international markets have impacted the repayment capacity of some textile and garment units, and the sector-specific conditions would only change gradually for the better.
A total of 22 banks, including public sector, private sector, and foreign banks, participated in the survey by the Federation of Indian Chambers of Commerce and Industry (FICCI) and Indian Banks’ Association (IBA). These banks together represent about 67 per cent of the banking industry, as classified by asset size.
Respondent banks continued to remain sanguine about asset quality prospects in the current round of the survey, cushioned by policy and regulatory support.
Over half of the respondent banks in the current round believe that gross NPAs would be in the range of 2.5-3 per cent over the next six months.
The latest Financial Stability Report of the Reserve Bank of India (RBI), released in late June, showed scheduled commercial banks’ gross NPA at 2.8 per cent, and net NPA at 0.6 per cent as of the end of March 2024.
A resilient domestic economy, accompanied by upgraded and improved credit assessment, effective and continuous credit monitoring, lower slippages, high write-offs, and the healthy capital position of banks, were some of the key factors cited by respondent bankers who expect asset quality to further improve over the next six months, it added.
Referring to the overall business environment, the FICCI-IBA survey observed that the Indian economy and the banking sector remain robust and resilient. With improved balance sheets, banks are supporting economic activity through sustained credit expansion. However, credit growth is outpacing deposit growth, which could lead to liquidity challenges for the banking system.
Raising deposits to keep pace with loan growth and keeping credit costs low remains on top of banks’ agendas, it added.
First Published: Sep 10 2024 | 7:44 PM IST
