Rs 2.6 trillion of bank credit may slip in next 12-18 months: IndRa

Mumbai: Domestic rating agency India Ratings and Research on Wednesday said the banking system has Rs 7.7 trillion of unrecognised stressed loans in corporate and SME sector and expects around 35 per cent of them to slip into the NPA category in the next 12-18 months.

"Indian banks are sitting on unrecognised stressed loans worth of Rs 7.7 trillion. We estimate that potentially Rs 2.6 trillion of corporate and SME loans, which is 3.2 per cent of total bank credit, will be recognised as stressed loans by fiscal 2019," the rating agency said in a webinar here today.

It pegs stressed corporate and SME debt at 22 per cent of total bank credit.

The recognised stressed corporate and SME loans in the system currently stands at around 12 per cent of total bank credit.

The agency said the total unrecognised stressed book that banks are sitting on, around 1.8 per cent is to stressed public sector units, around 2 per cent of it either enjoys some group support and could flow to joint lender forum or would be subject to asset sale, around 2.9 per cent could be the addition to the restructured book from infrastructure projects.

It said the sectors which have the highest unrecognised stressed exposure include infrastructure, power, telecom and real estate among a few other sectors.

"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 said.

India Ratings said that the impaired assets will peak at 12.5-13 per cent by fiscal 2019.