The outlook on the asset quality of the banking sector seems to be weak even as the fresh non-performing asset (NPA) generation rate continues to show signs of moderation, rating agency ICRA said in a report.
The fresh additions to gross NPAs (GNPAs) during third quarter of 2016-17 stood lower at Rs 26,400 crore as compared to Rs 1.36 lakh crore during the nine months of 2016-17, partly aided by higher write-offs during the last quarter, it said.
"While the declining fresh NPA generation may reflect the easing asset quality pressures, the large quantum of fresh slippages outside the standard restructured advances also reflects the asset quality pressure outside the restructured book, it said.
The large share of advances undergoing resolution through various schemes on resolution of stressed assets, especially the strategic debt restructuring (SDR) scheme, is also a matter of concern.
As on December 31, 2016, 72 per cent of the debt continues to be classified as 'standard' advance on account of the applicability of the standstill clause on asset classification under the SDR scheme.
The report also highlights the vulnerability of the accounts that have undergone resolution through 5/25 refinancing scheme.