The Net NPAs would also move up to 3.1-3.2 respectively by March 2021 from 2.2 per cent as of September 2020 on elevated credit provisions during H2FY21 as well.
However, Net NPAs and credit provisions will subsequently trend lower in FY22 as the banks
have reported strong collections on loan portfolio. Most banks
reporting collections of over 90 per cent.
The loan restructuring requests much lower than previously estimated due to sharper than expected improvement in economic activities and liquidity support through emergency credit line guarantee scheme.
Anil Gupta, Sector Head – Financial Sector Ratings, Icra said, with expectations of sustained collections and lower restructuring, the asset quality is expected to improve further. This will lead to lower credit provisions and better profitability in FY2022. This provides impetus to lenders and rejuvenate their lending decisions.
The low interest rates, improved business volumes, better job prospects and income levels could also stimulate credit demand next year. This coupled with better competitive positioning of banks on steep decline in cost of deposits could improve bank credit growth to 6.0-7.0 per cent in FY2022 from an estimated 3.9-5.2 per cent in FY21 and 6.1 per cent in FY20, it added.
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