To understand more about asset quality, to understand banking sector and the financial sector generally, CNBC-TV18 spoke to Ashish Gupta, MD-Investment Banking-India, Head of Research at Credit Suisse India.
The deadline for lenders to resolve the default cases in the Reserve Bank of India’s (RBI) second list ended yesterday and as per some reports 22 out of 28 companies will go to the National Company Law Tribunal (NCLT).
According to Gupta, the provisioning requirement in th second list is higher because RBI’s second list has newer NPAs with lower provisions.
Market should not look at provisioning requirement for six months but at 18 months, said Gupta.
He said banks need 65 percent provision coverage on stressed assets. The aggregate provision coverage amongst banks is 42-43 percent.
He said at Rs 13 lakh crore loans we could be at the peak of impaired loans in banking industry.
Post recapitalisation of PSU banks, they are expected to do well, he said.
He said although during recapitalization news they shifted some weight from NBFCs to PSU banks, for all NBFCs the business case does not go away just because yields have gone higher.
Many of NBFCs have strong asset franchise, very strong niche business - like gold financing, rural financing, truck financing etc and these competitive advantages for them would continue, said Gupta.
So, the house is still positive on NBFCs that can sustain high growth rates.
When asked about credit growth, he said it should not be difficult to see double-digit growth in Q1FY19 on back of nominal GDP growth in double-digits.For full discussion, watch video