Bad loans of banks may cross Rs 10 lakh crore by end of this fiscal

According to research released on Tuesday, banks’ bad loans could reach Rs 10 lakh crore by the end of the fiscal year, owing to slippages in the retail and MSME sectors. “By March 2022, NPAs are likely to climb to 8.5-9 percent, owing to slippages in retail, Micro, Small and Medium Enterprise (MSME) accounts, as well as some restructured assets” according to a study by industry organization Assocham and ratings agency.

The present asset quality stress cycle will not be the same as it was a few years ago. NPAs were mostly from larger, chunkier accounts at the time.

According to the report, smaller accounts, particularly MSME and retail segments, are projected to be more vulnerable than large corporates this time because the latter has significantly consolidated and deleveraged their balance sheets in recent years.

The RBI, on the other hand, has tightened the rules for such defaulters and made the rules for stressed asset resolution harsher. This, together with the IBC framework’s more excellent resolution of large-ticket NPAs, has resulted in improved NPA recovery.