NPAs can be reduced to Rs 9.1 lakh cr for fiscal year 20: Report
New Delhi, September 3 () Gross bad loans from banks are expected to fall marginally to Rs 9.1 lakh crore by the end of the current financial year, according to a report.
Gross non-productive assets (NPA) of Indian banks were located at Rs 9.4 lakh crore as of March 31, 2019, according to a joint study by Assocham-Crisil.
There is a significant potential opportunity for stressed asset investors, given around Rs 9.4 lakh crore NPA in the banking system as of March 31, 2019. From this, it is estimated that the corporate segment, which has seen an active interest of Most investors represent 70 percent, the report 'Reinforcement of the ARCs' said.
He said that large stressed borrowers have an aggregate debt of Rs 5.4 lakh crore, which is a huge playground in itself for investors.
Of the total, list-1 and list-2 of the National Court of Corporate Law (NCLT) comprised about Rs 2.1 lakh crore and the existing NPA stock included other Rs 2 lakh crore.
Beyond this, it is estimated that assets of around Rs 1.3 lakh crore are under stress, but have not been recognized as NPA, these assets could pass to NPA in the short and medium term, the report said.
The energy, infrastructure and steel sectors together constitute approximately half of the stressed assets worth Rs 4.1 lakh crore. The electricity sector represents the highest proportion, and the resolution in this sector has not been significant.
He said that the revised framework of stressed assets is expected to benefit the stressed assets of the electricity sector that were operational and about to be referred to insolvency proceedings under IBC (estimated at Rs 1 lakh crore as of March 31, 2019 ).
The RBI resolution framework on the recognition of bad loans and the Bankruptcy and Insolvency Code (IBC) have paved the way to attract investors to the space of stressed assets and have helped accelerate the resolution, solve problems related to legal aspects and resolution deadlines will be critical to boost investors confidence, he said.
The report also said that with greater cash participation becoming a norm, asset reconstruction companies (ARCs) should focus more on resolutions and attract co-investors.
Therefore, the growth of assets under management (AUM) of ARCs is expected to be in the range of 8-10 percent in the medium term, the report adds.
In the future, with an increase in the proportion of cash offers, discounts are expected to remain on the upper side.
To make way for new acquisitions and also to attract new and repeated investors, it is imperative that ARCs quickly resolve assets and redeem security receipts.
The Assocham-Crisil study also highlighted that ARCs have learned from past experiences and are implementing successful strategies to improve recovery rates. The recovery rate, which is the gross recovery of the principal debt acquired, is expected to improve to 44-48 percent from the previous level of 40 percent due to faster debt aggregation, the acquisition of a lower harvest of assets, positive changes in the regulatory framework and improved credit discipline and support from the promoters of a company under resolution, he said. KPM KPM ANU ANU