The survey revealed that 77 per cent of the respondent banks reported a decrease in the NPA levels in the last six months, with public sector banks reporting better asset quality as compared to their private sector counterparts.

The 18th round of the FICCI-IBA Bankers’ survey was carried out for the period July to December 2023. A total of 23 banks, including public sector, private sector and foreign banks, participated in the survey. These banks together represent about 77 per cent of the banking industry, as classified by asset size.

Over half of the banks covered in the FICCI-IBA Bankers’ unveiled on Thursday believe that gross non-performing assets would be in the range of 3-3.5 per cent over the next six months.

“All responding public sector banks have cited a reduction in NPA levels while amongst participating private sector banks, 67 per cent of banks have cited a decrease. None of the respondent PSBs and foreign banks have stated an increase in NPA levels over the last six months while 22 per cent of private banks reported an increase,” the survey highlighted.

Amongst the sectors that continue to show a high level of NPAs, most of the participating bankers identified sectors such as Food Processing, Textiles, and Infrastructure.

The survey also suggests that the outlook for non-food industry credit over the next six months is optimistic with 41 per cent of the participating banks expecting non-food industry credit growth to be above 12 per cent while 18 per cent feel that non-food industry credit growth would be in the range of 10-12 per cent.

Moreover, 36 per cent of the respondents are of the view that non-food industry credit growth would be in the range of 8-10 per cent.

“Over half of the respondent banks in the current round believe that Gross NPAs would be in the range of 3-3.5 per cent over the next six months. 14 per cent of respondents are of the view that NPA levels would be in the range of 2.5-3 per cent,” Ficci stated.

As such, term deposits have picked up pace as reported by the respondent banks. Further, around 70 per cent of respondents have reported a decrease in the share of CASA deposits in total deposits.

According to the survey, 65 per cent of respondent banks reported credit standards for large enterprises to have remained unchanged as against 54 per cent in the last round.

Respondents reporting easing of credit standards has decreased to 17 per cent in the current round as against 29 per cent in the previous round while those reporting tightening in credit standards were largely the same as in the previous round.

For SMEs too, 64 per cent of the respondent banks reported no change in credit standards in the current round, and 27 per cent have reported easing of credit standards.

“India’s economy held relatively well in FY24 compared to other major economies driven by strong investment growth and a rebound in industrial activity.

“Credit growth also continued to rise, supported by factors such as economic expansion and a continued push for retail credit which has been supported by improving digitalisation. The banking sector’s clean balance sheets support further loan growth going forward,” Ficci stated.

The survey findings show that long-term credit demand has seen continued growth for sectors such as Infrastructure, Metals, Iron and Steel, Food Processing. Infrastructure is witnessing an increase in credit flow with 82 per cent of the respondents indicating an increase in long-term loans as against 67 per cent in the previous round.

Customers’ search for higher rates and the ability to lock those interest rates for a longer time has led to a shift in favour of term deposits, found the survey.

Over 40 per cent of respondents have reported a decrease in requests for restructuring of advances in the current round of the survey as compared to 54 per cent in the previous round.

The proportion of respondent banks citing an increase in requests for restructuring of advances was 17 per cent, which is the same as in the previous round. Bank-wise analysis revealed that 50 per cent of participating PSBs have cited a decrease in requests for restructuring of advances while 30 per cent of such respondents have reported an increase in such requests.

As per respondents, some of the sectors that may continue to show NPAs over the next six months include textiles and garments, agriculture and gems and jewellery.

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