Banks face turbulent year: S&P
Analysts Geeta Chugh and Deepali Seth noted that tough market conditions affected the performance of Indian corporates adversely over the last few years, raising asset quality concerns for banks. Reported gross non-performing assets (NPAs) for banks rose to 2.9% by March 2012, compared with 2.4% in March 2011.
“We expect gross NPAs for banks to rise to 3.9% by March 2013, then to 4.4% in the next fiscal and, thereafter, to start improving,” Chugh said talking to reporters on a conference call.
The banking industry’s fortunes, however, are not expected to show any sharp recovery and most of it will depend on how the recovery of the corporate sector shapes up. Power, road, metals, mining and automobile sectors are expected to improve in next two years as policy paralysis is removed.
“We expect the returns on assets (RoA) for the banking sector in the current and next financial year will be at 0.9%, which will improve back gradually to 1% depending upon how quickly the corporate sector starts improving,” Chugh said.
S&P estimates the Indian banking industry would have a $ 3-4 billion shortfall in capital if it immediately