Expect Indian Banks' Bad Loan Ratio to Rise in FY16: Icra

Mumbai: Indian banks' gross bad loan ratio could rise to as high as 5.9 per cent during the fiscal year to March 2016 after a rule change made debt restructuring costlier, rating agency Icra Ltd said on Monday.

Icra, an associate of Moody's Investors Service, said it expected the lenders' gross non-performing loans as a percentage of total loans to be between 5.3 per cent and 5.9 per cent in the fiscal year 2015-16, compared with 4.4 per cent as of March 2015.

New rules effective from April this year require banks to make 15 per cent provision for restructuring loans, treating those at par with bad loans. Earlier they were providing 5 per cent for restructured loans.

In absolute numbers, gross bad loans could rise to as much as Rs 4.7 lakh crore ($73.4 billion) by March 2016 from Rs 3.1 lakh crore a year earlier, Icra said.

Stressed loans, which include bad and restructured loans, could remain flat or increase at a slower pace in 2015-16, the rating agency said.

It expects stressed loans at between Rs 7.4 lakh crore and Rs 8 lakh crore, or as much as 10.5 per cent of total loans, by March 2016. As of last March, stressed loans were Rs 7.4 lakh crore, or 10.6 per cent of total loans, Icra said.

($1 = 64.0800 rupees)