The study titled ‘Reinforcing the Code’ states that Gross Non-Performing Assets (GNPA) NS banks It is expected to cross Rs 10 lakh crore by March 2022.
The current asset quality stress cycle will be different from what it was a few years back. NPAs then mainly came from bigger, chunkier accounts.
According to the study, this time around, small accounts, especially the MSME and retail segment, are expected to be more vulnerable than large corporates, as the latter have consolidated and delisted their balance sheets over the years.
Even though the announced restructuring plan for MSMEs and small borrowers may prevent NPAs from rising too much, there is an opportunity for stressed asset investors with expertise and interest in these asset classes.
“The effectiveness of the Insolvency and Bankruptcy Code (IBC) will be tested by a potential spike in NPAs as a pause on the initiation of new insolvency cases for the year ended March 2021 and most pandemic-induced policies or measures are unlikely to continue. be kept,” the study said.
The expected increase in GNPAs of both banks and non-banks in this financial year, due to the pandemic, will provide an opportunity for players in the stressed property market to seek resolution through various avenues, with IBC likely to be the most favoured.
However, the GNPAs of banks have declined from the peak observed in March 2018 and were lower till March 2021 as compared to March 2020. Supportive measures including six-month loan moratorium, Emergency Credit Line Guarantee Scheme (ECLGS) loans and restructuring measures. was one of the main reasons.
According to the study, there is scope for improvement in the risk management practices of Indian banks, especially public sector banks.
In the past, laws were not in favor of lenders and allowed errant promoters to take advantage of the tedious recovery process. This is borne by the high number of willful defaulters of banks, it is noted.
“However, the RBI has tightened norms for such defaulters and made stressed asset resolution norms more stringent. With increasing resolution of big-ticket NPAs under the IBC framework, the number of NPAs has increased,” the study said. Contributed to a better recovery.”