Monday, Sep 26, 2022

Indian banks assets under stress rise,may get worse : Reserve Bank of India

With stressed assets expected to get worse,Reserve Bank of India cautions risks have spiked.

With stressed assets (non-performing assets – NPAs) continuing to rise and expected to get worse,the Reserve Bank of India (RBI) has cautioned that risks to the banking system have increased over the last six months,but added that there are no systemic risks at the moment.

“The banking stability indicator shows that risks to the banking sector have increased since June 2013,” the Reserve Bank of India said in its half-yearly Financial Stability Report released today.

Raghuram Rajan: Inflation limiting RBI’s ability to boost economic growth

The indicator combines the impact on all major risk dimensions,said the RBI,which has carried out multiple tests before coming to this conclusion.

Subscriber Only Stories
Once dacoit, now cheetah mitra, Ramesh Sikarwar says: ‘If anyone attacks ...Premium
Cattle on roads, in courts in Gujarat as fund-less shelters let them loosePremium
How Gehlot’s deft power play makes Congress leadership cut a sorry ...Premium
Axes, scrapers, handmade tiles — latest finds in excavation near ChennaiPremium

“The strain on asset quality continues to be a major concern,” the report said.

With the present conditions continuing,the gross NPAs in the system will rise to 4.6 per cent by September 2014 from 4.2 per cent in September 2013 or about Rs 2.29 trillion from Rs 1.67 trillion a year earlier,it said.

The amount of recast loans touched an all-time high of 4 trillion or 10.2 per cent of the overall advances as of September 2013,the report added.


However,the RBI expects some positives in the second half of the next fiscal and is estimating gross NPAs to improve to 4.4 per cent by March 2015.

In case the economic conditions deteriorate,the same number will be 7 per cent by March 2015,the RBI warned.

The state-run banks will be the worst-affected,the report said,pegging the GNPAs for public sector banks at 4.9 per cent by March 2015. It projected the GNPAs for private banks at 2.7 per cent in the same period.


If the restructured assets are added,the total stressed advances ratio will rise to 10.2 per cent as of September 2013 from the 9.2 per cent in March 2013,the RBI said.

The report reiterates that RBI will discontinue the system of relaxed restructuring of advances from 2015 onwards and warned that state-run banks will be affected the most as the provisions will shoot up.

“The regulatory concerns regarding restructuring arises from the possibility of the relaxations not being used judiciously by banks commensurate with the viability of projects. These relaxations for asset classification/provisioning will be phased out by April 2015,” it said.

The report said though agriculture accounted for the highest GNPAs at 5.5 per cent as of the quarter to September 2013,it is the industrial sector with a GNPA of 4.9 per cent and 10.9 per cent of restructured loans which is the main culprit.

Among the sectors,it said infrastructure,iron and steel,aviation,textiles and mining,which have not been doing well,will continue to perform badly. “Some factors

affecting the asset quality adversely are current economic


slowdown – global and domestic – persistent policy logjams,delayed clearances of various projects,aggressive expansion by corporates during the boom phase with resultant excess capacities and deficiencies in credit appraisal,” it said.

The central bank also said that present levels of provisioning for loan losses by banks may not be sufficient to meet the expected losses if the conditions were to deteriorate.

First published on: 30-12-2013 at 12:21:13 pm
Next Story

The Indian Express most-read stories of 2013,Sachin Tendulkar’s retirement more popular than Narendra Modi’s anointment

Latest Comment
Post Comment
Read Comments