MUMBAI: Indian bank asset quality concerns following surge in restructured loans in 2008 and 2009 have eased as economic activity continues to improve, ratings agency Fitch Ratings said in a report.
Non-performing loans (NPLs) from Indian banks' 1.2 trillion (about $26 billion) restructured loan portfolio are estimated at 15-25 percent, it said in the report. This could lead to a moderate one percentage point increase in gross NPL ratio of the Indian banking system, up from 2.4 per cent at end-September 2009, Fitch said.
Fitch estimates these NPLs to peak in FY11, when close to 75 per cent of restructured loans are expected to mature and the resulting increased credit cost could impact return on assets (ROA) on an average by 13 basis points.
Textile, infrastructure, commercial real estate and steel account for nearly half of the total restructured loans, it said. The extent of restructuring among private banks was 2 percent of loans, markedly less than that of government banks (5 per cent) as larger private banks have relatively lower exposure to these industries, it said.
In December 2008, the Reserve Bank of India relaxed loan restructuring guidelines to help corporates with long-term viability to weather the economic slowdown and liquidity crunch. In FY09 and FY10, Indian banks on average restructured 4.4 per cent of loans, up from 0.71 per cent in FY08. Restructuring was mostly in the form of rescheduling principal for a period of 12-24 months, giving borrowers time to see off the downturn.
Source: ReutersCourtesy economictimes.indiatimes.com
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