Bank’s asset quality to improve in next six months as economy grows: Survey

A recent survey suggests that banks foresee a continued improvement in asset quality over the next six months, citing the restructuring of stressed units, a resilient economy, and strengthening credit growth as key drivers. According to the FICCI-IBA Bankers survey, over half of respondents expect gross non-performing assets (GNPA) to range from 3% to 3.5%, with an additional 14% anticipating NPA levels between 2.5% to 3%. Factors contributing to this trend include initiatives such as Time Settlement proposals, robust recovery mechanisms, and the effective utilization of the SARFAESI Act for bad loan recovery.

Conducted jointly by the Federation of Indian Chambers of Commerce and Industry and the Indian Banks' Association, the survey involved 23 respondents, including public sector, private sector, and foreign banks, representing around 77% of the industry by asset size. The survey also indicates that most banks are well-prepared for adopting Expected Credit Loss (ECL)-based provisioning, having established models and frameworks for computation, which are currently undergoing internal review and validation. Additionally, an optimistic outlook is projected for non-food industry credit over the next six months, with 41% of banks anticipating growth exceeding 12%.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.