Gross NPAs may hit 12.2 per cent in FY19

The worst might not yet be over for the banking sector as bad loans of commercial banks are expected to worsen to 12.2 per cent of total loans by March 2019, the Reserve Bank of India (RBI) said in its Financial Stability Report.

The estimates are based on a baseline scenario which assumes a continuation of the current economic situation. In the worst case scenario, the report said, the bad loan ratio could rise up to 13.3 per cent by the end of FY19. The increase in bad loans is estimated to be the highest for public sector banks.

As part of its assessment, the central bank also measured the performance of state-owned banks under PCA and the banks outside the framework.

While non-PCA banks reported a gross NPA ratio of more than 13.5 per cent, banks under the PCA saw their gross bad loan ratios rise to 21 per cent of total loans. These numbers could further go down to 14.1 per cent and 22.3 per cent, respectively, by the end of the current fiscal, the report noted.