As much as Rs 5 lakh crore of bank loans deteriorated into non-performing assets (NPAs) in fiscal 2018, taking the total slippages in the past three fiscals to Rs 13.6 lakh crore, according to credit rating agency Crisil. But the tide seems to be turning with a sharp reduction in the special mention account (SMA)-2 cases and better NPA recovery prospects.
About a fifth of the slippages last fiscal was due to withdrawal of various structuring schemes by the Reserve Bank of India in February 2018, after the Insolvency and Bankruptcy Code (IBC) process came into force.
As a result, gross NPAs increased to about Rs 10.3 lakh crore, or about 11.2 per cent of advances, as on March 31, 2018, compared with Rs 8 lakh crore, or about 9.5 per cent of advances, as on March 31, 2017, said Crisil. However, Crisil expects moderation in slippages, better recoveries from NPAs and improved provision coverage to bode well for banks.
For example, SMA-2 (or special mention account cases, where exposures are overdue by 60-90 days), have more than halved to about 0.8 per cent of advances as of last fiscal-end, compared with about 2 per cent a year before, indicating considerable reduction in stressed loans that can potentially regress into NPAs.