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MSME, aviation NPAs could rise in near future: Ficci-IBA survey


Banks expect the next wave of non performing assets (NPAs) to come from micro small and medium enterprises (MSMEs), aviation, tourism, power and retail trade sectors, a survey conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Indian Banks’ Association (IBA) showed.

The industry bodies conducted a survey of 25 banks between January and June this year which together make up 76% of the asset base.

Though asset quality of banks has continued to improve 67% of those surveyed reporting a drop in NPAs over the last six months, some sectors like textiles, infrastructure, retail, food processing, metals and iron and steel continue to show high level of NPAs.

“Going forward, more than half of the respondents expect gross NPA levels to be below 8% by the end of December 2022 while 33% of the respondents are of the view that gross NPAs would be in the range of 9%,” the survey said. “65% of the respondents expect NPAs from MSMEs to increase in the next six months while 50% expect an increase from aviation in the next six months.”

Recovery of economy from Covid19 shock, higher credit growth, substantial deleveraging of corporate balance sheets, better performance of industry, healthy capital position and transfer of NPA accounts to NARCL were cited as the key factors by respondent bankers who reported gross NPAs to be below 8% and in the range of 8 to 9% over the next six months.

Requests for restrurcturing of accounts has also come down with the proportion of respondent banks citing an increase in requests for restructuring of advances has dropped to 12% in the current round of survey from 61% in the previous round with 56% of respondents reporting decrease in such requests in the current round of the survey.

The survey indicates that credit flow to infrastructure is increasing with 76% of the respondents indicating an increase in long term loans as against 68% in the previous round. “In case of chemicals, 52% of the respondents indicated an increase in long term loans in the current round as against 32% in the previous round while the petroleum products sector was indicated by 40% of the respondents, in the current round as against 27% in the previous round,” the survey said.

Banks have also seen a rise in low cost current and savings account (CASA) deposits with 75% of those surveyed reporting a rise in CASA.

Most of the respondent banks believe that priority sector guidelines of the Reserve Bank need a relook and have suggested increasing the cut off for loans given to agriculture, renewable energy and NBFCs. They have also suggested adding more sectors sectors for

eligibility including the entire agri value chain as well as areas related to climate sustainability.

About 48% of the respondents expect non food credit to increase above 10% in the next six months while 24% expect it to grow between 8% to 10% in that period.



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