Banks have reported a 69 per cent spike in non-performing assets in the last two quarters following the asset quality review ordered by the Reserve Bank of India (RBI) and fresh slippages in restructured loans.
Gross NPAs of lenders have surged by a whopping Rs 2,41,000 crore in just six months — December and March quarters of fiscal 2015-16 — mostly due to the aggressive provisioning undertaken by PSU banks at the behest of the RBI. As a result, gross NPAs have gone up from Rs 349,113 crore in September 2015 when the RBI ordered the asset review to Rs 590,772 crore by March 2016, say figures compiled by Care Ratings.
The NPA ratios of at least four banks are in a precarious position, warranting “prompt corrective action” by the RBI, banking sources said. Indian Overseas Bank has gross NPAs of Rs 30,049 crore, or 17.40 per cent, of its advances are bad loans. UCO Bank’s gross NPA ratio is 15.43 per cent, UBI 13.26 per cent and Bank of India 13.07 per cent. Punjab National Bank, Canara Bank and Allahabad Bank have virtually doubled their bad loans after the RBI review.
“The RBI review has clearly brought out the skeletons from banks’ cupboards. Some of them were clearly understating their bad loans in quarterly results before the RBI review. We are yet to see the bottom of this problem,” said a top banking source. State Bank of India, which showed a stable trend in NPA levels before the RBI asset quality review added Rs 42,000 crore to the overall NPA level of Rs 98,172 crore after the stringent provisioning ordered by the RBI. As much as Rs 62,000 crore of SBI bad loans is accounted by large and mid-corporates with the latter’s defaults aggregating Rs 41,515 crore.
Has NPA level peaked or will there be more disclosures in the ongoing quarter? “I would like to wait for another two quarters to conclude that the worst is over. I think there is still some cleaning up to do which will be done in these two quarters if need be. But this would be bank specific and not universally. We have witnessed fairly aggressive provisioning in the last two quarters which should start tapering off now,” said DR Dogra, managing director & CEO, Care Ratings.
“To my mind the stress is coming from the stalled projects especially in the infra space as well as industries like textiles and metals, which have all been buffeted by various factors in the last 3-4 years. There is always a ‘lagged’ and ‘continuation’ effect in these cases and a very ordinary performance in this space is responsible for the same,” Dogra said. “We have been bitten very largely by the steel sector. We will keep away from those sectors where we have been bitten until that sector turns around. Apart from steel, we have exposure to textiles. We will be cautious on these sectors too,” PNB MD & CEO Usha Ananthasubramanian recently said in Mumbai.
Banks also seem to have wiser now. “Earlier banks looked more at the names of the promoters, but today, we are in the process of having high collateralised or good quality proposals. There are certain sectors to be avoided,” said the chairman of a PSU bank.
Rajesh Narain Gupta, managing partner, SNG & Partners, said, “Pricing panel (announced by the government) does not seem to be a good idea. It indicates trust deficit. Even today most of the nationalised banks find it difficult to consider any hair cut or settlement or even a strong action against borrower being scared of CVC / internal conflicts, investigations and even being haunted after retirement.”