SYSTEMWIDE bad loans will improve by 180 basis points to 8.5 percent in March 2020 from FY19 levels on slower slippages, and the state-run banks will turn profitable for first time in four years, says a report. The banking system will close FY19 with gross non- performing assets of 10.3 percent, ratings agency Crisil said on Monday in its half-yearly report on credit movements. The credit ratio, which is the ratio of upgrades to downgrades, moved up to 1.81 times in the second half of FY19 from 1.68 times in the first half. From a quantum of debt perspective, the debt-rated credit ratio moderated to 0.89 times primarily due to two telecom firms slipping.
A slump in advanced economies as well as Government spends on infra may lead to a moderation in the credit ratio in FY20, the agency warned. The report sees non performing asset (NPA) ratios improving by 180 bps to 8.5 from 10.3 despite a 14 percent growth in assets expected during the fiscal. “Moderation in slippages, coupled with recoveries from the bankruptcy resolutions, will play the key role in non performing asset (NPA) reduction,” it explained. Incremental slippages came down to 3.8 percent of total assets in FY19 from over 6 per cent levels in the previous two fiscals, it added.
This is slated to help the state-run lenders, who are expected to return to the black after four consecutive years of losses, it said. Over 60 percent of total upgrades were in investment- linked and export-linked sectors, which got a fillip from domestic infra spends and global growth.