Research agency India Ratings has said that the current problems around restructuring of assets for the banking industry will continue for the next three years.
"For the next three years we should be prepared that restructured loans would be there and it depends on the way global economy is going to behave," Atul Joshi, managing director and CEO of India Ratings and Research, told reporters on the sidelines of a banking event in Mumbai on Wednesday.
"A lot depends on the policy measures that government would take, be it power sector or roads. So a lot of it is not a project risk, it is also a policy risk."
According to industry data, banks, led by state-run lenders, have cumulatively recast loan worth more than Rs 2.5 lakh crore under the corporate debt restructuring (CDR) mechanism, under which the repayment tenor of a loan is delayed.
So far in FY 2014, banks restructured Rs 75,000 crore loans under the CDR mechanism, which was nearly double the level in the previous fiscal year.
"There is a possibility that 15-20 per cent of the restructured book may slip into non-performing assets (NPAs) by this fiscal, should the economy not improve, and gross NPAs could reach close to 5 per cent," Boston Consulting Group said in its latest report.
The report highlighted that the banks need capability to do deeper strategic due diligence and take tough management actions for turning around the restructured assets.
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