NPAs may rise 5.5-6.5% in June 2015 on new RBI norms: ICRA
There could be steep increase in the reported non-performing asset (NPA) percentage from 3.3 percent as on March 2013 to as high as 5.5-6.5 percent as on June 30, 2015, rating agency ICRA said.
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Due to new the revised RBI guidelines on restructured loans, there could be steep increase in the non-performing assets (NPA) percentage from 3.3 percent as on March 2013 to a number as high as 5.5-6.5 percent as on June 30, 2015, rating agency ICRA said. Also read: RBI stiffens loan restructuring norms for banks"This is so because regulatory forbearance on classification of old restructured advances (except for project loans yet to achieve commencement of operation) would cease by April 1, 2015. However, increase in reported gross NPAs would not have a material impact on the credit profile as vulnerability would remain the same," it said in a research report. The new guidelines on restructured loans will also help vulnerable accounts (gross non-performing assets plus restructured loans) in the system to drop further in June 2013 from estimated 8.2 percent to 8.5 percent as on March 31, 2013. Additionally, reduction in the specified period to one year of satisfactory performance of standards restructured accounts from the earlier stipulated two years could also facilitate faster upgradation of non-stressed restructured accounts.Here are some key points: New guidelines are likely to reduce the level of restructured advances as well as flow of restructured advances for most banks because of special dispensation to projects (infrastructure, commercial real estate and other projects) till the time these units declare date of commencement of commercial operationsBeyond June 2013, the likely trajectory that the vulnerable accounts take would also hinge on the economic environment as well as the resolution of fuel availability issues in power generation and structural reforms in power distribution.It is estimated that power sector exposures would constitute a large chunk of restructured advances in the short to medium term (over 30%).Moreover, stringent conditions for restructuring with immediate effect and abolition of regulatory forbearance on asset classification for restructured accounts from 2015-16 would make restructuring more difficult. Therefore, unviable exposures would directly slip into NPA category.
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