MUMBAI, June 8 (Reuters) - Indian banks’ gross bad loan ratio could rise to as high as 5.9 percent during the fiscal year to March 2016 after a rule change made debt restructuring costlier, rating agency ICRA Ltd said on Monday.
ICRA, an associate of Moody’s Investors Service, said it expected the lenders’ gross non-performing loans as a percentage of total loans to be between 5.3 percent and 5.9 percent in the fiscal year 2015/16, compared with 4.4 percent as of March 2015.
New rules effective from April this year require banks to make 15 percent provision for restructuring loans, treating those at par with bad loans. Earlier they were providing 5 percent for restructured loans.
In absolute numbers, gross bad loans could rise to as much as 4.7 trillion rupees ($73.4 billion) by March 2016 from 3.1 trillion rupees a year earlier, ICRA said.
Stressed loans, which include bad and restructured loans, could remain flat or increase at a slower pace in 2015/16, the rating agency said.
It expects stressed loans at between 7.4 trillion rupees and 8 trillion rupees, or as much as 10.5 percent of total loans, by March 2016. As of last March, stressed loans were 7.4 trillion rupees, or 10.6 percent of total loans, ICRA said. ($1 = 64.0800 Indian rupees) (Reporting by Devidutta Tripathy; Editing by Anand Basu)