The overall stress in commercial lending has not been increasing and the NPA addition to the banking system is expected to slow down after September 2019, says a study by credit information company TransUnion CIBIL.

Post September 2019, overall non-performing asset (NPA) levels are expected to remain stable with a possible downward bias if there is strong recovery from identified NPAs, according to the study. The study also reveals that the stock of high-risk debt fell for two quarters in a row.

However, going forward, it is likely that a significant portion of the ₹3.1-lakh crore of ‘unrecognised NPA’ exposure will be formally recognised as NPA, unless the borrower’s economic fundamentals improve such that they become ‘standard assets’.

‘Unrecognised NPAs’ refer to standard accounts that are prima facie not expected to be tagged as NPA, even though the borrower may have been labelled so by other lender/s. However, this definitely classified these borrowers as ‘imminent NPA’ and, more often than not, they slipped into NPA status.

While Gross NPAs have steadily risen from ₹8-lakh crore (March 2017) to ₹10.4-lakh crore, ‘unrecognised NPAs’ have steadily fallen from ₹5.5-lakh crore (March 2017) to ₹3.1-lakh crore (March 2018). This may be attributed to a regulatory push in ‘cleaning’ banks’ books. Exposure to ‘irregular borrowers’ has reduced from a peak of ₹7.9-lakh crore in September 2017 to ₹6.6-lakh crore in March 2018. This development may be due to better payment discipline among corporate borrowers, which coincided with implementation of Insolvency and Bankruptcy Code.

Satish Pillai, MD & CEO, TransUnion CIBIL said: “This analysis suggests that the cumulative effort of the RBI, the government and banks together are showing early signs of success as the stock of stressed assets and high-risk debt are coming down across India’s banking system.”

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