“Riding on the post-pandemic economic recovery and higher credit growth,” the agency said in a statement, “the key indicator of the asset quality of banks is likely to improve.”
Loans from Indian banks rose 15.5% in the two weeks from a year ago to August 26, while deposits grew by 9.5%, the latest reserve Bank of India data shown.
The asset quality of the banking sector will also benefit from the proposed sale of NPAs National Asset Reconstruction Company Limited ,narco), the agency said.
“The steady improvement in corporate asset quality is clearly reflected in key indicators such as credit quality of bank exposure,” Reuters said. Krishnan SitaramanOn Senior Direct and Deputy Chief Rating Officer CRISIL RatingAs saying.
A study of large exposures of banks with more than half of corporate advances showed that the share of high-security exposures rose to 77 per cent by March 2022, from 59% in March 2017, as compared to sub-investment grade companies. in more. Crisil noted that the halving has gone up to 7% versus 17%.
The improvement in asset quality in the corporate segment has been in the wake of significant clean-up of bank books in recent years, and stronger risk management and underwriting.
Meanwhile, the retail segment remained resilient and gross NPAs are expected to be in the range of 1.8-2.0% in the medium term, informed Crisil.
“While inflationary pressures on interest rates and cash flows of individual borrowers will need to be monitored, almost half of retail loans are home loans, where borrowers have relatively better credit profiles,” it said.
It said, “In the medium term, to avoid a recurrence of past asset-quality challenges, it is important that banks do not relax their credit underwriting standards while focusing on rapid growth.”
(with inputs from Reuters)