Bank sticky loans rise by Rs 2,000 crore

Bad loan is not a bane of PSU banks alone; nine new private sector banks have accumulated net NPA of Rs 161.41 crore. The NPA of these banks during 1995-96 was zero because they all started operations quite recently. Global Trust Bank Ltd which started only a few years ago has the highest NPA of Rs 66.85 crore (only 4.47 per cent). Indusind Bank follows with Rs 40 crore and UTI Bank’s NPA is Rs 23.42 crore.

Among the old private sector banks, Federal Bank witnessed an increase in net NPA (in absolute figures) from Rs 87.88 crore to Rs 214.38 crore, followed by Bank of Rajasthan. BoR’s net NPA has jumped from Rs 59.92 crore to Rs 132.12 crore, according to the RBI report.

The gross NPA of public sector banks will be more than double this figure — around Rs 42,000 crore as per one estimate — because of the liberal lending norms followed by them following surplus liquidity created in the last few credit policies through a series of cuts in cash reserve ratio and statutory liquidity ratio (SLR) requirements. In the first half of 1997-98 many banks have reported substantial increase in bad debts due to recessionary industrial scenario and corporate failures.

The RBI report says there is only one public sector bank which has net NPA above 20 per cent of its net advances. The net NPA of Indian Bank has gone up from 23.87 per cent to 25.24 per cent. The NPA of Indian Bank which incurred heavy losses is Rs 1,735 crore which constitutes a whopping 25.4 per cent of the net advances. The large scale NPA was caused by lacunae in the RBI’s supervisory mechanism. The NPA was Rs 1,879.84 crore in 1995-96.

Among public sector banks, Bank of Baroda is leading the race in terms of total NPA. BoB’s NPA has jumped by Rs 357 crore in one year from Rs 1,120 crore to Rs 1,477 crore, Bank of India’s figure increased from Rs 1,083 crore to Rs 1,189 crore. Canara Bank too has witnessed a jump in bad loans by Rs 366.15 crore from Rs 975.85 crore to Rs 1,342 crore. Dena Bank’s NPA has jumped by Rs 134.2 crore from Rs Rs 260 crore to Rs 394. crore. Central Bank of India’s NPA has jumped from Rs 1,201.17 crore to Rs.1267 crore. While Union Bank of India’s NPA has gone up from Rs 516 crore to Rs 639 crore, Oriental Bank’s figure went up from Rs 171 crore to Rs 276.46 crore. Corporation Bank also doubled its NPA figure from Rs 54.33 crore to Rs 108.27 crore, as per the RBI report.

The net NPA level (a critical indicator of the quality of a bank’s overall health) constitutes as much as 9.18 per cent of total advances of these banks, showing a rise from 8.90 per cent in the previous year. "In the case of State Bank of India group — the largest in the country — net NPA as a proportion of advances rose from 6.88 per cent to 7.70 per cent in 1996-97," said the report. The net NPA of SBI and its seven subsidiaries has gone up from Rs 5,362.02 crore to Rs 6382.01 crore in 1996-97. The NPA of SBI alone has gone up from Rs 3921.27 crore to Rs 4,524.57 crore.

The gross NPA of banks only will reflect the health of Indian banks as many of the banks resort to large scale write off of bad loans to show a healthy balance sheet. They also resort to "one time settlements" giving undue favours to the defaulting corporate accounts. Without mentioning the huge loan defaults by companies, the RBI report stated that the "priority sector advances (mainly to small units and farmers) accounted for only 47 per cent of the total NPAs and non-priority sector advances for the balance."

Significantly, nine new private sector banks have also accumulated NPAs of Rs 161.41 crore (upto 10 per cent). The RBI had given permission to private parties to start new generation banks which are projected as more efficient than the public sector banks. The high NPA level of new private sector banks within a few years of operation tells volumes about the credit appraisal system of these banks. A few of the new private sector banks which had huge exposure in these cases have written of the due amounts as non-recoverable. Banking circles say that the new private sector banks which are given license to operate more efficiently than the nationalised banks are not different in the case of NPA management.

Even foreign banks have witnessed a sharp increase in bad debts as the net NPAs of 23 foreign banks have increased by Rs 488 crore from Rs 182 crore to Rs 670 crore in one year. Among the foreign banks, the largest NPA is with Bank of Tokyo-Mitsubishi. According to the RBI, the Japanese bank’s bad debt has gone up from Rs 19.90 crore (1.1 per cent) to Rs 189.77 crore (17.36 per cent). This is followed by Standard Chartered Bank with Rs 74.80 crore followed by Hong Kong Bank with Rs 69.60 crore (Rs 10.80 crore last year). Citibank, the leading foreign bank in the country, has witnessed a sharp increase in NPA from Rs 2.64 crore to Rs 25 crore. American Express Bank recorded a sharp rise in NPA from Rs 3 crore to Rs 35 crore. Mashreq Bank’s NPA went up from Rs 4.46 crore to Rs 50.82 crore, Societe Generale’s bad debts increased from Rs 62 lakh to Rs 25.33 crore and Deutsche Bank’s figure went up from zero to Rs 29.90 crore.