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Journalism of Courage
Though the banking sector in general has done well in reducing non-performing assets (NPAs), or loans defaulted by borrowers, new generation private sector banks have slipped on this front during 2006-07. Gross NPAs of new private banks have shot up by 55 per cent to Rs 6,287 crore during the year as against Rs 4,052 crore in the previous year, reversing the declining trend in the last four years, the Reserve Bank of India (RBI) has said.
However, public sector banks, which were notorious in accumulating NPAs in the 1990s, have managed to bring down bad loans further — from Rs 41,358 crore during the year 2006 to Rs 38,968 crore in 2007. This is a 40 per cent decline from Rs 64,812 crore in 2004. The total NPAs of all commercial banks fell from Rs 51,097 crore to Rs 50,487 crore in 2007.
The Reserve Bank of India has already noted the slippage. “The asset quality of new private sector banks, though comfortable, showed some signs of weakening,” the RBI said in its Report on Trend and Progress of Banking in India. The same is the case with foreign banks operating in India, with their gross NPAs rising from Rs 1,928 crore in 2006 to Rs 2,263 crore in 2007.
However, old generation private banks managed to bring down their NPAs from Rs 3,759 crore to Rs 2,969 crore in 2007. “Defaults in the retail segment seem to have added to the NPAs. One large private bank which was very active in retail lending contributed the maximum to NPAs,” said an analyst.
According to the RBI, NPAs in the priority sector increased during 2006-07. “This was mainly due to an increase in NPAs in the agriculture sector while NPAs in the small-scale sector declined. The NPAs in the public sector, too, increased during the year,” it said.
Banks have been successfully using the SARFAESI Act and Debt Recovery Tribunals for recovery of bad loans in the last four years. Besides, higher write-offs and sale of NPAs to asset reconstruction companies also aided banks in cutting NPAs. Although gross NPAs in absolute terms have declined, net NPAs have increased, reflecting a higher write-back of excess provisioning than fresh provisioning made during the year.
The ratio of gross NPAs to gross advances has improved significantly in the last six years — from 11.4 per cent in 2001 to 2.5 per cent in 2007. This is comparable, or even better, when compared to other countries. Argentina’s NPA-advances ratio improved from 13.1 per cent to 3.2 per cent, Korea from 3.4 to 0.8 per cent, Brazil from 5.6 per cent to four per cent, Japan from 8.4 per cent to 2.5 per cent, the UK from 2.6 per cent to 0.9 per cent and Australia from 0.6 per cent to 0.2 per cent.
But the NPA-advances ratio is still high for urban co-operative banks (UCBs) in India at 17 per cent. Gross NPAs of UCBs fell marginally from Rs 13,506 crore in 2006 to Rs 13,363 crore in 2007.
Yes, there’s a housing loan slowdown
MUMBAI: The RBI has confirmed that there is a slowdown in the housing loan segment. The growth in housing loans declined to 24.6 per cent at Rs 45,508 crore in 2006-07 from 38.3 per cent at Rs 51,273 crore in the previous year, according to the central bank. High interest rates and soaring real estate prices contributed to the fall in growth.
