Credit rating agency, India Ratings and Research (Ind-Ra) in its latest report has said that corporate and small and medium enterprise (SME) loans aggregating to Rs 2.60 lakh crore, which is 3.2 percent of total bank credit, could potentially be recognized as stressed loans by FY19. It noted that Indian banks are sitting on unrecognized stressed loans worth of Rs 7.7 lakh crore. It pegs stressed corporate and SME debt at 22 percent of total bank credit and the recognised stressed corporate and SME loans in the system currently stands at around 12 percent of total bank credit.
The report highlighted that the impaired assets will peak at 12.5-13 percent by fiscal 2019. It also estimated that out of the total unrecognized stressed book that banks are sitting on, around 1.8% is to stressed public sector units, around 2% of it either enjoys some group support and could flow to joint lender forum or would be subject to asset sale, around 2.9% could be the addition to the restructured book from infrastructure projects and 3.2% is the potential slippage in next 12-18 months.
The credit rating agency further said that the sectors which have the highest unrecognised stressed exposure include infrastructure, power, telecom and real estate among a few other sectors. It also elaborated that while the iron and steel sector has seen lot of stress recognition in the asset quality review exercise conducted by the Reserve Bank in the last fiscal, provisioning continues to remain inadequate considering higher loss given default estimates. It added that some sectors including infrastructure, real estate among others have lower amount of stress recognised as in many cases they enjoy group support.