With majority of stressed assets now recognised as non-performing assets (NPAs), the residual corporate loan portfolios of banks are set to provide a more credible performance.
While the agriculture and SME segments are expected to witness some spike in delinquencies due to loan waivers and the implementation of the Goods and Services Tax, they are unlikely to materially impair the asset quality of banks.
And as banks move to resolve NPAs under the Insolvency & Bankruptcy Code, they may have to absorb large haircuts. Will banks drag feet, therefore, or take it on the chin one time and clean up is a multi-billion-rupee question.
Re-capitalisation will enable public sector banks (PSBs) to provide for NPAs and improve their balance-sheet health. PSBs will also get some breathing space to meet Basel III norms over the medium term because pace of credit growth expected to pick up gradually.
Given all this, CRISIL is organising a web conference on banking where its experts will discuss:
The composition of stressed assets in the banking system
The adequacy of operating profit to absorb high provisioning requirements as NPAs age
The impact on profitability in case of accelerated provisioning on NPAs
The adequacy of recent steps by the RBI to hasten/facilitate balance sheet clean-up
Will capital be a major roadblock to the clean-up
At the conference, CRISIL will make a presentation. A panel discussion between senior bankers and a Q&A session will follow.