Terming FY18 as a ‘challenging’ year for Indian banking, domestic rating agency Icra on Thursday said newer segments like MSMEs and farmers are also reporting stress, and NPAs for listed banks will shoot up to 10.2 per cent by FY18-end. It said the April-June period saw fresh slippages shooting up to a five-quarter high of Rs .15 lakh crore and estimated that the system will end FY18 with slippages of Rs 3 lakh crore.
On an annualised basis, the 6.3 per cent for Q1FY18 is higher than 6.2 per cent (annualised) for the preceding March quarter and the 5.5 per cent tracked in FY17, it said. Apart from large corporates, trouble is also being reported from the micro, small and medium enterprises segment and the farm loans, which together contributed for half of the incremental NPAs, its group head Karthik Srinivasan told reporters over a conference call. He said the MSMEs are facing trouble because of the transient impact of Goods and Services Tax implementation, while it is the weakening of the credit culture in the aftermath of waivers that is affecting the farm loans.
The gross NPAs for the 41 listed banks are likely to increase to Rs 8.8-9.0 trillion (9.9-10.2 per cent) by March 31, 2018 from the 9.5 per cent at the end of FY17. Because of the rising NPAs, the amount of provisions to be set aside as cover will also increase. Banks are also writing-off loans at a faster clip (Rs 30,600 crore in Q1FY18 versus Rs 22,100 crore) in order to compress the GNPA figures, and recoveries and upgrades continue to be weak, it said.