Global ratings agency Standard & Poor’s on Tuesday warned that gross non-performing assets (NPAs) of Indian banks are likely to rise to 4.5 per cent by the end of March 2015 from 4 per cent in the previous year, thereby lagging the economic recovery. According to S&P, any aggressive market share gaining tactics by new banking entrants may adversely impact the banking sector’s stability. “The sector’s stability or risk appetite could be hit if any of the new players relax their underwriting standards or undercut prices to gain market share,” it said in a note. Infrastructure lender IDFC and micro-lender Bandhan were chosen among two dozen applicants to enter the banking fray in February 2014, and have an 18-month period to operationalise. “We expect the pace of creation of stressed assets to slow over the next two to four quarters. However, any material improvement in asset quality will lag economic recovery, corporate de-leveraging, decisive steps to alleviate problem of stressed sectors, and some respite from high interest rates,” it said.
