Bad loans of listed banks rise 50% in first nine months

Bad loans of listed banks rise 50% in first nine months
Major banks like SBI, BoB, PNB report over 50% increase in Net NPAs

February 18, 2013: Net non-performing assets (NPAs) or bad loans of listed banks rose by 50% or around Rs. 30,840 crore in first nine months of current financial year ended December 31, 2012, according to a study done by NPAsource.com, a unique and first of its kind portal, which focuses on resolution of stressed assets. As on March 31, 2012, net NPAs of 40 listed banks were Rs. 61,558 crore, which rose to Rs. 92,398 crore as on December 31, 2012.

Out of the total forty listed banks, sixteen banks have reported more than 50% jump in net NPAs during these nine months. These sixteen banks together accounted for more than 80% or Rs. 25,000 crore of incremental net NPAs.

Net NPAs in State Bank of India (SBI), Punjab National Bank (PNB) and Bank of Baroda (BOB) rose by 60.4%, 70.3% and 117.9% respectively. These three banks accounted for close to 47% or Rs. 14,500 crore of incremental net NPAs.

Elaborating on data, Mr. Devendra Jain, CMD, Atishya Group, owner of portal NPAsource.com said, “These figures show the herculean task the banking sector in India is facing even as the industry and regulators are putting in place various measures to control further increase in NPAs Our data shows that during the Oct-Dec 2012 quarter, net NPAs of these banks rose by 8.7% or Rs 7,400 crore. We believe net NPAs of these listed banks will cross the Rs 1 lakh crore mark as on March 31, 2013. However, it is likely that from the next financial year the NPAs in the Indian banking sector may come under control if interest rates begin to go down.”

“Growth in restructured advances, particularly of big ticket loans is another cause of concern for the central bank. The recent financial stability of Reserve Bank of India showed that the proportion of restructured standard advances to gross total advances increased to 5.9% as of September 2012 from 4.7% in March 2012, which is a matter of concern,” Mr. Jain said.

According to the report, the central bank is also worried about increasing slippage ratio, which is likely to pressurize banks’ profitability in the next few quarters. Slippage ratio is defined as the ratio of fresh accretion to NPAs during the year to standard advances at the beginning of the year.

Though the central bank has recently reduced repo rate, it is unlikely to have a major impact on the NPAs. For the current fiscal, NPA figures of all banks are yet to come in public domain and the RBI report in September clearly stated that this could worsen further if current macro-economic situation persists.

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