Will NPA Rise In Next 3 Years – Free PDF Download

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A study of top 500 private sector companies by India Ratings & Research.
These 500 debt-heavy borrowers have an outstanding loan book of Rs 39.28 lakh crore.
Out of this, the existing default amounts to Rs 7.35 lakh crore loans.
The size of corporate loan book stands at around Rs 64 lakh crore.
In next three years if the pace of economic expansion doesn’t pick up sufficiently,
An additional 4% of this amount, translating roughly into Rs 2.54 lakh crore could tip into default.

WHAT IS THE GDP ASSUMPTION?

The predictions are based on the assumptions of 6% average real GDP growth in FY21 and FY22, with input cost not rising more than 4% and rupee not depreciating by more than 5%.
Even if the average GDP growth rises to 7% over the same period, the incremental slippages could still be around Rs 1.98 lakh crore.

The problem emanates from the inability of corporates to deploy their funds productively.
The share of productive assets in the system has gone down sharply as incremental debt continues to be used to fund losses.

A default does not necessarily mean that it would translate into non-performing assets.
According to Reserve Bank of India’s new rule, companies that delay in loan repayment by a single day are considered defaulters.

A non performing asset (NPA) is a loan or advance for which the principal or interest payment remained overdue for a period of 90 days.

The firm had conducted a similar analysis in 2016 & said that the predictive ability of the analysis was very high.
Around 67% of the extremely vulnerable issuers actually defaulting since then.

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