Credit growth to double in Q1FY19, health of PSU banks to improve post recapitalisation, says Credit Suisse India

Published On: 14, Dec 2017 | Source:

Pinning hopes on the double-digit GDP growth, the Indian division of the global financial services company Credit Suisse predicted credit growth to double in the first quarter of the fiscal year 2019. Talking to CNBC-TV18, Ashish Gupta, MD-Investment Banking-India, Head of Research at Credit Suisse India said, “It should not be difficult to see double-digit growth in Q1FY19 on back of nominal GDP growth in double-digits.” Credit Suisse India also added that the public sector banks (PSB) should perform well after capital infusion by the government ends. “Post recapitalisation of PSU banks, they are expected to do well,” he said. The banks need at least 65 percent provision coverage on stressed assets and the aggregate provision coverage amongst banks is 42-43 percent, he further added.

The banks finally set the ball rolling yesterday by referring most of the 28 companies identified by the Reserve Bank of India (RBI) as defaulters in the second list to the National Company Law Tribunal (NCLT) for resolution under the Insolvency and Bankruptcy Code (IBC), reported The Indian Express. “According to a banking source, as many as 25 companies will be referred to the NCLT. Another source said a list of only 23 companies will be forwarded now as lenders are in the process of finding a resolution for three to five companies,” sources told The Indian Express.

The central bank had earlier asked lenders to assess the sustainable debt for a company — regardless of whatever scheme has been initiated whether an S4A (scheme for the sustainable structuring of stressed assets) or an SDR (strategic debt restructuring) — and have this debt upgraded to investment grade by rating agencies. Since there were not too many companies that needed to be rated, the process should not take much longer, the bank had explained. Following the referral by banks of a clutch of 12 large accounts to the NCLT, banks have been asked to look for solutions to an additional 28 distressed companies. These 28 companies together owe banks a little over `1.5 lakh crore. Of the 12 large accounts, 11 have been admitted by the NCLT and a resolution for these companies will be found as per the Insolvency and Bankruptcy Code (IBC). These companies have outstanding debt of more than `2.4 lakh crore. The total non-performing assets (NPAs) in the banking system are estimated at `8.5 lakh crore; in other words, approximately 10 percent of all outstanding loans have turned bad.