NPA Banking sector set to achieve best asset quality; Net NPAs to drop to best level in over a decade
New Delhi: The banking sector is set to achieve its best asset quality in over a decade this fiscal year, with headline gross NPAs and net NPAs declining to 2.63% and 0.83% respectively in March 2023, according to Moody's and Icra Ratings, reported media.
The agencies anticipate a low gross fresh NPA generation of 2% for the year, the lowest since fiscal 2012.
They attribute this positive trend to strong domestic demand, improved credit conditions, and enhanced solvency and funding.
The report predicts continued profitability due to robust loan growth and expects further improvement in the credit quality of banks and non-banking financial institutions.
Despite global banking challenges, Indian banks have strong funding capabilities and liquidity, enabling them to support loan growth in line with the country's economic conditions.
Recapitalization efforts and deleveraged balance sheets also contribute to the positive outlook.
India Inc's credit quality is expected to remain strong, driven by higher economic growth, government policies, and investments in infrastructure projects. Although inflation may impact profitability, the overall credit metrics are expected to remain stable, supported by debt reduction and sustained economic growth.
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