Quoting a Reserve Bank of India report, the finance ministry in its annual report 2015-16 has said that the gross non-performing assets (GNPAs) of banks could rise to 6.9 per cent by March 2017 in a “severe stress scenario” due to sluggishness in the economy.
“According to ‘Financial Stability Report (FSR)’, December, 2015 of Reserve Bank of India (RBI), the macro stress test for credit risk suggests that under the baseline scenario, the GNPA ratio may rise to 5.4 per cent by September 2016 from 5.1 per cent in September 2015, but could subsequently improve to 5.2 per cent by March 2017,” the finance ministry said.
“However, if the macroeconomic conditions deteriorate, the GNPA ratio may increase further, and it could rise to around 6.9 per cent by March 2017 under a severe stress scenario,” the report said.
The Capital to Risk Asset Ratio (CRAR), an indicator of bank’s capital adequacy, could decline to 10.4 per cent by March 2017 from 12.7 per cent as of September 2015, it said.
According to the report, the main reasons for increase in NPAs of banks include sluggishness in domestic growth during the recent past, slowdown in recovery in the global economy and continuing uncertainty in the global markets leading to lower exports of various products like textile, engineering goods, leather, gems.
Besides external factors, it said, ban in mining projects, delay in clearance of projects in power and steel sector, volatility in prices of raw material and shortage of power have impacted operations in infrastructure sectors, which were aggressively funded by the banks in the past.
An amount of Rs 1,30,156 crore was classified as NPAs in public sector banks for borrowers exceeding Rs 500 crore as on December 2015, according to finance ministry data.
The annual report said government has taken various steps to contain NPAs such as capital infusion in PSU banks, streamlining the appointment process and changes in laws for faster debt recovery.
The infrastructure sector lending had a major bearing on the PSU banks, the report said. In order to address the NPA situation, the report said government has taken sector specific measures in identified areas like road, steel, power and textiles. It is also setting up six new Debt Recovery Tribunals to facilitate recovery of bad loans.