Banks’ asset quality will improve further in the next six months on the back of restructuring of eligible stressed units along with a resilient economy and credit growth strengthening, said a FICCI-IBA Bankers survey on Thursday.

It said that over half the respondents believe gross non-performing assets (GNPA) would be in the range of 3 to 3.5% in the next six months.

Further, as many as 14% of respondents believed NPA levels would be in the range of 2.5% to 3%.

As per the survey, the outlook for non-food industry credit over the next six months is optimistic, with 41% of the participating banks expecting non-food industry credit growth to be above 12%.

About 18% feel that non-food industry credit growth would be in the range of 10-12%. As many as 36% of the respondents said credit growth in the non-food industry would be in the range of 8 to 10%.

The survey was conducted by the Federation of Indian Chambers of Commerce and Industry and the Indian Banks’ Association among 23 respondents.

These included the public sector, private sector and foreign banks. These banks together represent about 77% of the industry, classified by asset size.

Banks were asked about their preparedness for the eventual adoption of Expected Credit Loss (ECL)-based provisioning. The majority of the banks said they were well-positioned for a smooth transition to the ECL regime.

It further said that India’s economy held relatively well (7.6%) in FY24 compared to other major economies, driven by strong investment growth and a rebound in industrial activity.

“Credit growth also continued to rise, supported by factors such as economic expansion and a continued push for retail credit which has been supported by improving digitalization,” it said.

Long-term credit demand has seen continued growth for sectors like infrastructure, metals, iron and steel, and food processing.

Infrastructure is witnessing an increase in credit flow with 82% of the respondents to the FICCI-IBA survey indicating an increase in long-term loans as against 67% in the previous round.

About 36% of the respondents are of the view that non-food industry credit growth would be in the range of 8%–10%.

“Customers’ search for higher rates and the ability to lock those interest rates for a longer time has led to a shift in favour of term deposits. As such, term deposits have picked up pace as reported by the respondent banks,” the FICCI-IBA survey said.