"Competition in the banking sector to intensify with the entry of new banks...competition from foreign banks set to intensify," the research house said in a report.
RBI Governor Raghuram Rajan had said that he expected new bank licenses by January 2014. However, the foreign lenders are not much enthused about the WOS guidelines and have been asking for clarity on a slew of topics.
For the domestic banks, it is expected to be a double whammy as the credit growth in the system is likely to be suppressed, it added.
D&B attributed the rise in NPAs to high exposure of banks to projects in the infrastructure and iron and steel sectors and said asset quality will be a "major concern" going forward.
"The effectiveness of cabinet committee on investment in clearing stalled infrastructure project would play a major factor in determining the asset quality of the banking sector going ahead. A faster clearance rate would help Indian banks contain the pace of growth of distressed loan assets," it said.