A substantial 77 per cent of respondent banks reported a decline in non-performing asset (NPA) levels over the past six months, according to the eighteenth round of the FICCI-IBA Bankers’ survey conducted for the period of July to December 2023. Notably, all participating public sector banks (PSBs) cited a reduction, while 67 per cent of private sector banks also reported a decrease. Conversely, none of the respondent PSBs and foreign banks noted an increase in NPA levels, while 22 per cent of private banks reported a rise.
Key sectors identified by the survey as continuing to exhibit high NPA levels include Food Processing, Textiles, and Infrastructure.
The survey encompassed 23 banks, representing approximately 77 per cent of the banking industry by asset size. Noteworthy is the decrease in requests for restructuring of advances, with over 40 per cent of respondents reporting a decline compared to 54 per cent in the previous round. The proportion of banks reporting an increase remained at 17 per cent, consistent with the prior round.
Respondents expressed optimism regarding asset quality prospects, attributing it to policy and regulatory support. Over half of the respondent banks projected Gross NPAs to be in the range of 3-3.5 per cent over the next six months, with 14 per cent anticipating levels between 2.5-3 per cent.
| Key sectors identified by the survey as continuing to exhibit high NPA levels include Food Processing, Textiles, and Infrastructure. |
Credit demand growth
The survey highlighted continued growth in long-term credit demand, particularly in sectors such as Infrastructure, Metals, Iron and Steel, and Food Processing. Furthermore, it indicated an optimistic outlook for non-food industry credit growth, with 41 per cent of participating banks expecting growth to exceed 12 per cent.
In response to challenges, banks identified impediments including low consumer awareness, competition from fintech and digital insurance players, and the Rs 5 crore sum insured cap for banks.
Respondent banks also outlined steps taken to support climate adaptation and mitigation efforts, including the introduction of Environmental, Social, and Governance (ESG) policies and lending towards green projects.
Overall, the survey reflects a positive trajectory in asset quality and credit growth, underpinned by supportive policies and strategic initiatives by banks.
| None of the respondent PSBs and foreign banks noted an increase in NPA levels, while 22 per cent of private banks reported a rise. |
