What's giving banks less anxiety about NPAs

Mumbai: Indian lenders have received loan recast requests of about 2 lakh crore, considerably lower than the 8 lakh crore anticipated earlier, as the deadline drew to a close at the stroke of midnight on Saturday.Requests have come in from the likes of Shapoorji Pallonji, Future Group, Jain Irrigation, IRB, Ashok Buildcon and a dozen other corporates, three lenders aware of the proposals told ET. A significant part of the recast requests have come from the mid-corporate loan category and MSMEs, they said. Lenders now have 180 days to implement these requests.“Proposals under the one-time restructuring scheme have been considerably lower; this is due to the faster economic turnaround and (also in part) the delay by borrowers to make repayments in light of the ongoing loan moratorium case in the apex court,” one of the persons cited above said.To give relief to borrowers affected by the pandemic, the regulator set up a committee under veteran banker KV Kamath to define a one-time recast framework. ET recently reported that bankers had communicated to the Kamath committee that they don’t expect more than seven to eight large-value cases with debt of more than 1,500 crore each to be recast under the Covid restructuring scheme. About 390 accounts, each with an exposure of more than 1,500 crore, were standard at the end of March.According to an analysis by rating agency ICRA, banks could recast 2.5-4.5 per cent of their total advances from the previously projected 5-8 per cent.“Banks have reported strong collections on their loan portfolio with most banks reporting collections of over 90 per cent,” said Anil Gupta, VP, ICRA. “The loan restructuring requests have been much lower than previously estimated which has been supported by sharper than expected improvement in economic activities as well liquidity support through emergency credit line guarantee scheme.”A recent Crisil study has also said that as many as 99 per cent of companies — excluding micro, small and medium enterprises — are unlikely to opt for the one-time-debt-restructuring (OTDR) in a preliminary analysis of 3,523 non-MSME units. This is largely on the back of improving business sentiment and gradual opening up of the economy.Despite a significantly lower number of recast requests, the central bank raised concerns over the likely asset quality stress the banking system will face once the regulator starts unwinding all the Covid related relief measures.“With the moratorium coming to an end, the deadline for restructuring proposals is fast approaching and with the possible lifting of the asset quality standstill, banks’ financials are likely to be impacted in terms of asset quality and future income,” the central bank had said.ICRA estimated that gross and net non-performing loans are likely to rise in the near term to 10.1-10.6 per cent and 3.1-3.2 per cent, respectively, by March 2021. Another analysis made by brokerage house ICICI Securities expects cumulative slippage run-rate of 4-7 per cent over FY21 and FY22. This could be 10-30 per cent higher than the last three years' average.

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