Starting from FY19, GNPAs have been seeing an improvement and touched a decadal low of 3.9 per cent in FY23 and were at 3 per cent in the December quarter of FY24, the report highlighted.
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The gross non-performing assets (GNPA) of banks are set to improve further upto 2.1 per cent by the end of the Financial Year 2025, said a report by rating agency Care Ratings on Friday.
Care Ratings highlighted that the GNPAs are likely to come at 2.5-2.7 per cent in FY24 and will improve further to 2.1-2.4 per cent by the end of FY25.
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It also flagged downside risks, which may result in its estimate not coming true, including a material weakening in asset quality due to the elevated interest rates, the impact of regulatory changes, a tighter liquidity environment and global issues.
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The GNPAs surged to 11.2 per cent in FY18 from 3.8 per cent in FY14 due to the Asset quality reviews (AQR) process of 2015-16, which pushed banks to recognise NPAs and reduce unnecessary restructuring and added that the stress was emanating from the exposure to big-ticket wholesale advances.
Starting from FY19, GNPAs have been seeing an improvement and touched a decadal low of 3.9 per cent in FY23 and were at 3 per cent in the December quarter of FY24, the report highlighted.
From a sectoral perspective, the agriculture sector’s GNPA ratio reduced to 7 per cent in September 2023 compared to 10.1 per cent reported in March 2020, while the industrial sector reported a 4.2 per cent GNPA ratio in September 2023 against 14.1 per cent in March 2020 and 22.8 per cent in March 2018.
The retail loan GNPA was 1.3 per cent in September 2023 against 2 per cent in March 2020, the agency said, adding that a bulk of the stress is due to unsecured loans, credit card receivables and education loans, the report said.
The Reserve Bank of India (RBI) had said the GNPA ratio of Indian banks continued to improve in the second quarter of the current financial year, easing to a fresh decadal low.
The improvement in the asset quality of banks that began in 2018-19 continued into the first half of 2023-24, with the GNPA ratio falling to 3.2 per cent at end-September from 3.9 per cent at end-March.
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