NPAs or non-performing assets, or in layman's terms -- bad loans, have gone down in the first quarter of this financial year and at 7.9 percent it is a little higher than FY21 but much lower than the pre-COVID reading of March 2020 which was 8.7 percent. This is according to the Credit Suisse Financial Health Tracker authored by Ashish Gupta, who many sector watchers consider the final word in corporate debt.

Gupta started authoring ‘House of Debt’ in 2012, which helped even the RBI gauge extent of NPAs (non-performing assets) or in layman's terms bad loans, and subsequently start then the asset quality review.

The report points out that retail loans have shown a bit of stress and slippage has risen in the first quarter by a percent, primarily consumer loans.

The funding costs have continued to moderate for banks and the cost of deposits is barely 4 percent. However, with muted loan growth, the loan to deposit ratio is not rising. For private banks it's about 75 percent and for public sector banks, it's even lower at 70 percent. Therefore margins will continue to be under pressure.

His preferred picks are Axis Bank, ICICI Bank, SBI HDFC.

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