The loan restructuring volume of Indian banks is likely to be lower at 2.5-4.5% of advances from the earlier estimates of 5-8%, as fewer borrowers are expected to submit recast requests, Icra said on Monday. “This will lead to lower credit provisions and better profitability in FY22," he said. Icra expects credit provisions to decline to 1.8- 2.4% of advances in FY22 from 2.2-3.1% in FY21 and 3.1% in FY20, which will lead to improvement in return on equity (RoE) for banks. It also expects public sector banks to break even after six consecutive years (FY16-FY21) of losses and generate RoE of 0.0-5.4% in FY22. Improved asset quality and the consequent lower credit provisions could drive better profitability for banks and provide impetus and rejuvenate their lending decisions, the rating agency said.

Source: Mint December 28, 2020 17:35 UTC