Bank NPA will Improve in FY25:CARE Ratings
The projected improvement in banks’ gross non-performing assets (GNPAs) to up to 2.1% by the end of the fiscal year 2025 indicates a positive trend towards a healthier banking sector. Lower gross Non Performing Assets suggest that banks are experiencing fewer loan defaults or are effectively managing their non-performing assets.
The surge in Gross Non-Performing Assets from 3.8% in FY14 to 11.2% in FY18 was attributed to the Asset Quality Reviews (AQR) process of 2015-16. This process compelled banks to recognize gross Non Performing Assets and curtail unnecessary restructuring. The stress was primarily stemming from exposure to significant wholesale advances.
However, since FY19, there has been a noticeable improvement in GNPAs. They reached a ten-year low of 3.9% in FY23 and stood at 3% in the December quarter of FY24, as highlighted in the report.
Regarding sectoral analysis, the gross Non Performing Assets ratio in the agriculture sector decreased to 7% in September 2023, down from 10.1% in March 2020. Similarly, the industrial sector reported a GNPA ratio of 4.2% in September 2023, a significant decline from 14.1% in March 2020 and 22.8% in March 2018.
