As net profits of banks shoot up, so do NPAs

State Bank of India, the largest commercial bank in India, has said its gross NPAs have come down from Rs 15,874.97 crore as of March 2001 to Rs 15,485.87 crore by March 2002. “The gross and net NPA levels have come down from 12.93 per cent and 6.03 per cent respectively as on March 31, 2001 to 11.95 per cent and 5.63 per cent respectively as of March 2002,” it said. Though SBI arrested the upswing in NPAs, this is only a small reduction when its size is taken into consideration.

However, other top banks have seen their defaulting loans rising. Central Bank of India’s gross NPAs have gone up to Rs 3,376 crore during 2001-02 from Rs 3,253 crore.

Bank of Baroda’s gross NPAs have shot up to Rs 4,489 crore from Rs 4,185 crore, Bank of Maharashtra NPAs rose from Rs 876 crore to Rs 906 crore and Union Bank of India’s from Rs 2,056 crore to Rs 2,420 crore. Punjab National Bank’s gross NPAs jumped from Rs 3,460 crore to Rs 4,139 crore.

“Many of the banks had gone for huge provisioning to clean up the books. As a result, net NPAs had fallen considerably,” said the former chairman of a nationalised bank. SBI alone provided Rs 2153.10 crore in 2001-02 for non-performing assets (as against Rs 1432.53 crore in 2000-01). Punjab National Bank made a provision of Rs 679 crore and Central Bank Rs 476 crore.

According to bankers, there were cases when defaulters of one bank have managed to get more loans from other banks. The RBI and banks, which do not reveal the identity of defaulters, disclose only the identity of defaulters against whom suits have been filed by banks. “It has been increasingly recognised that one of the reasons for the rise in NPAs was the lack of requisite co-ordination between the two sets of lenders (banks and FIs), particularly where they are joint financiers of large value projects,” said the RBI’s ‘Trends and progress of banking in India, 2000-01’.

With the NPAs soaring, the government had recently come out with an ordinance on securitisation giving sweeping powers to financial institutions and lenders for recovery of dues.

“The new ordinance vests financial institutions with the power to sell and lease out assets of defaulting companies through a simple advertisement in a newspaper,” said a FICCI official. The corporate sector led by FICCI and CII have already demanded a relook at the ordinance. The reason: many corporate barons figure in the defaulters list of banks.

According to an Ernst & Young, NPAs of banks and financial institutions in India are believed to be as high as $23-28 billion (Rs 1,15,000 crore to Rs 1,40,000 crore), much higher than official estimates of $16.7 billion (Rs 83,500 crore). The actual NPAs in India are estimated to be much higher due to India’s less stringent accounting norms than those of developed economies and the tendency of Indian banks to extend past-due loans, it says.