According to a report released by rating agency Crisil, a nearly three-fold increase in gross non-performing assets (NPAs) of the banks is projected by the year 2011 - the figures are likely to go up from the last year's 2.3 percent of advances to 5 per cent of advances by 2011.

Speaking in absolute terms, the gross NPAs would from last year level of Rs 55,000 crore to Rs 1.9 lakh crore.

The report says increased gross NPAs would result from increasing defaults in payments by companies and small and medium enterprises (SMEs), because of their puny risk profile and severe strain on operating margins.

Pinpointing the main reasons behind the rise in NPAs, Tarun Bhatia, Crisil's head of Finance Sector Ratings, cited the hold back in demand, funding shortage, protracted working capital cycles, and the momentous movement in foreign exchange rate.

While Bhatia noted that one of the impacts of NPAs would be higher provisioning - with nearly 25-40 percent of the banks' profits to expectedly go towards provisioning of NPAs during 2008-2011 - he added that the strong capitalization of the banking will facilitate the comfortable sopping up of the effect of the increased NPAs.

Bhatia said: "Even with the expected jump in NPAs, we project the ratio of net worth to net NPAs at 5 times as on March 31, 2011."