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Bank’s asset quality likely to improve further
February 23, 2023
Following the AQR exercise, banks’ gross NPA ratio jumped to 11.5% at the end of March 2016 with the public sector banking group leading the stress at 14.5%, data from RBI showed. The banking sector gross NPA was at 3.5% before AQR.
CareEdge expects gross NPA ratio of scheduled commercial banks to reduce in FY24 due to lower incremental slippages, a reduction in special mention accounts and restructuring portfolios, and healthy growth in advances.
“A decline in the overall stressed assets (GNPA plus restructured assets) due to a reduction in GNPAs on account of resolution and/or write-offs and improvement in restructured assets with control on asset slippages is expected to continue,” it said.
Fitch estimated that sound economic momentum contributed to a fall in credit costs to 0.95% in the nine months of FY23, as compared with 1.26% at FY22. “Lower credit costs were the primary factor driving an improvement in return on assets to 1.1% in 9MFY23, outpacing Fitch’s FY23 estimate of 0.9%, although earnings also benefited from higher-than-expected loan growth and improving net interest margins,” it said.
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