Even though restructuring has been discontinued, the newly introduced 5/25 scheme for infrastructure loans will act as a "mask" for the stress, it said, pointing to potential issues around transparency.

The scheme allows banks to refinance or sell long-term project loans after every five years. For banks to avail such a facility, the loan tenor cannot be more than 25 years.

Crisil said banks may not report such loans unlike the restructured advances. "We believe that the asset quality challenges will persist in the current year," Crisil director Rajat Bahl told reporters on a conference call.

He said both the disappearance of the regulatory forbearance of restructuring as well as slippages from the previously recast loans will weigh-in on the asset quality.
The agency estimated that the 'stressed assets', which it defines as the GNPA plus loans sold to asset reconstruction companies and estimates of loans turning bad under 5/25 scheme (15 per cent) and already restructured assets (35 percent), to stay flat at 6 percent (Rs 5.3 trillion) in FY16.

Crisil expects Rs 80,000 crore of assets to get transfered under the 5/25 scheme for infrastructure loans introduced last year to take care of the asset liability mismatches for the system. A bulk of the asset quality woes in the recent past has been attributed to trouble with infra loans.

With the greater amount of provisioning that such stressed assets will require, the agency said the banks will also suffer on the profitability front.
It said private banks, which have a better leash on asset quality due to composition of assets, will overtake the state-run lenders on profits at an aggregate level.
With the government shifting to supporting only the better performing banks, Crisil said the capital constraints will force many to go slow on their credit expansions.
The well-capitalised private sector banks' credit growth at 24 percent will be double that of state-run lenders' 12 percent, it said, adding that the overall system credit growth will be 15 percent, up from the 10 percent in FY14.

Private sector banks with better loan books will be able to raise capital, which will be difficult for the state-run lenders, Crisil's chief analytical officer Pawan Agarwal said.

Even though there is an enabling provision to reduce government stake in Public Sector Banks to 52 percent, raising capital will be a tough task for them, he added. The better-capitalised PSBs will grow at the system average, but there will be many with single-digit credit growth numbers.

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