Friday

02


April , 2021
FICCI-IBA Bankers’ Survey informs improvements in NPA levels for second half of 2020
11:56 am

B.E. Bureau


 

The twelfth round of the FICCI-IBA Survey was carried out for the period of July to December 2020. Total 20 banks including public sector, private sector and foreign banks participated in the said survey. According to the survey, almost a year into the pandemic, economic recovery has started to gain momentum and demand is holding up. 

The survey findings show that long term credit demand has been growing for sectors like infrastructure, pharmaceuticals and food processing. Particularly for the pharma sector, 45% of the respondents have indicated an increase in long term loans in the current round of survey as against 29% in the previous round. Infrastructure and pharmaceuticals are expected to see an increase in long term credit even in the first half of 2021, as reported by 68% and 58% of respondents, respectively. 

Improvement in NPA

The NPA levels for second half of 2020 have seen an improvement, with 50% of respondent banks reporting a decline in NPAs during current round of survey. Bank wise analysis reveals that major improvement in NPAs has come from the PSBs. The survey states that about 78% of participating public sector banks has cited a reduction in NPA levels. This can be attributed to an improvement in asset quality, especially with improved recoveries and higher write-offs by several banks.

Amongst the sectors that continue to show high level of NPAs, most of the participating bankers identified sectors such as Infrastructure, Metals, iron & steel, Real Estate and Engineering Goods. Nearly 68% of respondent bankers expect the NPA levels to be above 10% in first half of 2021. 37% respondents, in-fact expects NPA levels to be upwards of 12%.

Some of the high NPA risk sectors identified by majority of respondent bankers in current round of survey include tourism and hospitality, MSME, aviation and restaurants. 55% respondents of the survey believe NPAs to rise substantially in tourism and hospitality sector, while another 45% reported that NPAs are likely to increase moderately in this sector.

Another high NPA risk sector reported in current round of survey is the MSME sector, with 84% respondents expecting an increase in NPAs in this sector. Almost 89% respondents also expect Restaurants to see an increase in NPAs, though only 26% expect NPAs to increase substantially in this segment.

The survey further states that the number of banks reporting tightening of credit standards during second half of 2020 has come down. 47% of respondent banks reported tightening of credit standards for large enterprises as against 68% in the last round. Likewise, percentage of banks reporting tightening of credit standards for SMEs has come down to 21% from 44% in the last round. In-fact, there has been a significant increase in respondents that have eased credit standards for SMEs, from 28% in previous round to 53% in current round.

RBI in its second bi-monthly policy meeting had also extended the provision of one-time restructuring scheme for MSMEs, keeping in view the need to provide Covid-19 relief. The current round of survey reveals that there has been a significant increase in the request for restructuring of advances. An overwhelming 85% of the respondent banks have cited an increase in requests for restructuring of advances as against 39% in the last round.

Bankers thinks that increased focus on enhancing indigenous manufacturing capacity, extending PLI scheme to the manufacturing, service and export sectors, reducing the number of GST rate slabs and rationalising of rates can improve the present situation. Amongst the banking related measures, the surveyed respondents had asked for recapitalisation of banks which has also been announced in the Union Budget. 

Bankers were also asked to share their views on various avenues that government should consider for raising additional resources, considering higher fiscal expenditure in wake of covid-19 crisis. Some of the suggestions like accelerating disinvestments and monetising of government owned assets were announced in the Union Budget. Other suggestions by the bankers include introduction of tax-free ‘Covid bonds’, monetisation of enemy property assets, and gold disclosure scheme etc.

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