The Feb 12 circular from RBI will accelerate the NPA process and will lead to a faster recognition of pain in the books, said Ashish Gupta of Credit Suisse.
The Feb 12 circular from RBI will accelerate the NPA process and will lead to a faster recognition of pain in the books, said Ashish Gupta of Credit Suisse in an interview with CNBC-TV18 from the sidelines of their conference.
He said the circular was much needed because the banking regulator felt the pressure of stress on balancesheets and the resolution process was not moving at the desired pace. RBI could have also felt that the decision making under IBC was superior to some of the decision making taking palce in the JLFs and hence the circular.
As per their estimates, the GNPAs are likely to be at 16 percent of loans versus 10 percent reported by the industry and so post the circular, a large amount of restructured portfolios will become stress in the next few quarters, he said.
However, all the NPAs may not immediately move into NPA. The RBI has also provided a window to work on resolution plans of these assets, said Gupta.
According to him, with resolution of the accounts under NCLT list likely by end-April, some of the NPAs could move out, while others would come in due to RBI's new guidelines.
When asked if they would look at investing in the companies that have been granted new bank licenses, he said the performances of those being granted this license has been a mixed bag. So investors should look at those small finance banks which have a better deposit franchise.
With regards to NBFCs, he said there are two broader trends that are in their favour. One is pick-up in loan demand. Secondly, the pressure on net interest margins of NBFCs may not be as sharp as it was earlier because the banks have moved to MCLR regime and the lending rates of banks are now synced with deposit rates, which gives NBFCs much better pricing power.