Banks sitting on Rs 7.7 lakh crore unrecognised stressed assets: India Ratings

“While a sizeable proportion of the unrecognised stressed exposure has strong group linkage or some form of parental support, potentially half of it could further slip in the next 12-18 months,” the report said.

This is driven by the latest annual reports of some banks which have disclosed divergence in bad assets recognition by the bank compared to RBI’s disclosure.

Out of the total unrecognised stressed book that banks are sitting on, around 1.8 percent is to stressed public sector units; around 2 percent of it either enjoys some group support and could flow to the joint lender forum or would be subject to asset sale; around 2.9 percent could be the addition to the restructured book from infrastructure projects and 3.2 percent is the potential slippage in next 12-18 months.

Earlier, the agency had projected that impaired assets will peak at 12.5 -13 percent by FY18/FY19.

“The sector-wise break-up of stress shows some interesting findings; the sectors which have the highest unrecognised stressed exposure include infrastructure, power, telecom and real estate among a few other sectors,” the report added.

While the iron and steel sectors have seen lot of stress recognition in the Asset Quality Review exercise conducted by the Reserve Bank of India in the last fiscal, provisioning continues to remain inadequate considering higher loss given default estimates. Some sectors including infrastructure, real estate, among others, have lower amount of stress recognised as in many cases they enjoy group support.