Bank NPAs soar to Rs 60,841 crore

During the same period, there was an overall decline in the share of NPAs to total advances as well as total assets reflecting the impact of the revised guidelines regarding the prudential norms for banks resulting in the reduction in doubtful and loss assets. The share of standard assets in total advances of commercial banks increased from 84.1 per cent in 1998-99 to 86 per cent in 1999-2000, the RBi report said.

Gross NPAs to total assets declined to 6.0 per cent (6.7 per cent) and net NPAs to total assets also declined to 2.9 per cent (3.1 per cent). During the period, NPAs of both the old and new private sector banks recorded a decline as percentage of total assets as well as advances reflecting the impact of increase in standard assets to 91.5 per cent (89.2 per cent). Gross NPAs to gross advances of all private sector banks declined to 8.5 per cent (10.8 per cent). Net NPAs to net advances also showed a decline to 5.6 per cent (7.4 per cent). Gross NPAs to total assets declined to 3.6 per cent (4.5 per cent) and net NPAs to total assets declined to 2.3 per cent (2.8 per cent).

Foreign banks have also reported a fall in their NPA ratios, resulting from a decline in sub-standard assets. The share of sub-standard assets to total advances declined to 2.9 per cent (4 per cent). The gross NPAs to gross advances of foreign banks declined to 7 per cent (7.6 per cent) and net-NPAs to net advances also showed a decline to 2.4 per cent (2.9 per cent).The RBI has also recent undertaken a number of initiatives to enhance the disclosure standards and transparency in the operations of the banks. Steps have also been initiated to add transparency in the accounting standards which have a bearing on the overall robustness of the banking operations in an increasingly integrated global financial environment.

Exposure norms to be fine-tuned: The RBI said it will fine-tune exposure norms of banks to bring it on a par with international best practices. It also said that it had embarked on a review of current practices regarding credit exposure limits. "There are certain issues, which require further consideration. The first relates to the concept of `capital funds’; and the second relates to the scope of the measurement of credit exposure, in particular, the coverage of non-fund and other off-balance sheet exposures… the third relates to the level of exposure limit itself. Taking into account the complexities involved, it has been decided to prepare a detailed discussion paper on the subject, which would inter-alia address issues relating to current practices in India vis-a-vis international best practices and the possible alternative approaches with pros and cons and other relevant aspects," it said.

The RBI said that the discussion paper, which is expected to be finalised by December 2000, would be circulated among banks, and based on the comments and suggestions on the issues, and an interaction with banks, the RBI would take a final view on the approach that should be adopted with a view to making it effective from March 2002.

Effective from April 1, 2000, the exposure ceiling in respect of an individual borrower was reduced from 25 per cent to 20 per cent of the bank’s capital funds. Where the existing level of exposure as on October 31, 1999, was more than 20 per cent, banks were expected to reduce the exposure to 20 per cent of capital funds over a two-year period — by end of October 2001. The rupee sub-ordinated debt raised by banks as Tier-II capital would not be included in the capital funds for the purpose of determining the exposure ceiling to the individual group borrowers.

The guidelines reveals that risk management is necessary condition for maintaining, preserving and enhancing financial stability in the context of the financial and structural reforms that are being undertaken. "Management information system (MIS) in a bank is an important means for positioning appropriate risk management technique," the RBI report said.