NPAs likely to rise in first half of 2021: FICCI-IBA
Context: Asset quality of banks, which saw some improvement in the second half of 2020, is likely to worsen during the first six months of 2021. The findings are part of the 12th round of bankers’ survey carried out by FICCI-IBA between July and December 2020.
Details:
- The survey was conducted on 20 banks, including public sector, private sector and foreign banks.
- In the current round of the survey, half of the respondent banks reported a decline in NPAs during the second half of 2020. About 78% of participating state-run banks cited a reduction in NPA levels.
- However, in terms of outlook, nearly 68% of respondent bankers expect the NPA levels to be above 10% in the first half of 2021.
- Close to 37% of respondents expect NPA levels to be upwards of 12%.
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Non Performing assets (NPAs): ● Nonperforming assets (NPAs) are recorded on a bank's balance sheet after a prolonged period of non-payment by the borrower. ● NPAs place financial burden on the lender; a significant number of NPAs over a period of time may indicate to regulators that the financial health of the bank is in jeopardy. ● NPAs can be classified as a substandard asset, doubtful asset, or loss asset, depending on the length of time overdue and probability of repayment. ● Lenders have options to recover their losses, including taking possession of any collateral or selling off the loan at a significant discount to a collection agency. |
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