"We expect the restructured assets in the banking system to shoot up by another Rs 60,000 crore to Rs 1 trillion over the next five months," India Ratings Senior Finance Director Deep N Mukherjee said in a report on Tuesday.
The domestic rating agency has analysed the credit metrics of the top 500 corporate borrowers, with aggregate debt of Rs 28,76,000 crore, which is 73 percent of the total bank lending to the industry, services and export sectors.
The report said around 82 of these 500 borrowers have already been formally tagged as financially distressed or identified as non-performing assets (NPAs), or their loans have already been restructured.
Another 83, that is 17 percent of these top borrowers, accounted for 9 percent of the overall debt (which is Rs 28.76 trillion) and they have severely stretched credit metrics.
Within these 83 corporates, operating profitability barely covers the interest required to be serviced in most cases, and there is also the absence of any strong parent, the report said.
These corporates with severely weak credit metrics have limited expectation of an immediate improvement in profitability.
India Ratings further said potentially one-third to half of these 83 accounts could be in the category of SMA-2 (special mention accounts) with delays in debt servicing ranging between 61-90 days.

"If some of these corporates are unable to generate significant cash flow or infuse significant equity in the near-term, they may be identified by their lenders for restructuring pursuant to RBI guidelines," the report said.
Some of these corporates could also even deteriorate further to be tagged as NPA, the agency said.
The RBI, since May last year, has provided several directives and guidelines to banks with the purpose to gradually withdraw prevalent regulatory forbearance and simultaneously boost their risk management practices by early identification of stressed corporate accounts.
The calibrated withdrawal of regulatory forbearance will pick up speed from April 1, 2015 and it will require banks to keep higher provisions on restructured accounts, besides entailing a suitably stringent classification of restructured accounts as sub-standard assets.
"The gradual withdrawal of regulatory forbearance could persuade banks to take a decisive call on the weak corporates that need to be restructured," the report said.
"Thus, there is sufficient economic motivation for banks to undertake the Rs 60,000-1,00,000 crore 'big bath', where accounts whose performance may deteriorate could be addressed at one go, enabling banks to start FY16 on a relatively clean slate," the report said.

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