Skip to main content

India's public sector banks' bad loans or NPAs may cross 10%: RBI. A "troublesome pressure" on economy?

By Our Representative
The Reserve Bank of India (RBI) has said that risks to India’s banking sector have sharply gone up since December 2015, with the gross non-performing assets (GNPAs), or bad loans, rising “sharply to 7.6 per cent of gross advances in March 2016 from 5.1 per cent in September 2015”, adding, GNPAs may see a further deterioration over the next one year.
A non-performing asset (NPA), in simple terms, is tagged as “non-performing” when it ceases to generate income for the lender – or loans that are in jeopardy of default. Once the borrower has failed to make interest or principle payments for 90 days the loan is considered to be a non-performing asset.
Non-performing assets are problematic for financial institutions since they depend on interest payments for income. Experts say, troublesome pressure from the economy can lead to a sharp increase in non-performing loans and often results in massive write-downs.
Reportedly, for every Rs 100 parked in shares of public sector banks, investors carry the burden of Rs 150 as NPAs or bad loans, which have cumulatively ballooned to Rs 4 lakh crore, or 1.5 times the market value of these lenders.
Providing three different scenarios – baseline, medium stress and severe stress – to analyse GNPAs, the RBI says, “The macro stress tests suggest that under the baseline scenario, the GNPA ratio may rise to 8.5 per cent by March 2017 from 7.6 per cent in March 2016. If the macro situation deteriorates in the future, the GNPA ratio may increase further to 9.3 per cent by March 2017.”
PSBs: Public Sector Banks; PVBs: Private Sector Banks;
FBs: Foreign Banks
Saying that the “the credit and deposit growth of scheduled commercial banks (SCBs) slowed significantly during 2015-16”, the RBI, in its Financial Stability Report (FSR) June 2016, notes that their “risk weighted assets (RWA)” density declined during this period, largely reflecting re-classification of restructured advances to NPAs.”
“Among the bank-groups, public sector banks (PSBs) may continue to register the highest GNPA ratio”, the RBI says, adding, “Under the baseline scenario, their GNPA ratio may go up to 10.1 per cent by March 2017 from 9.6 per cent as of March 2016. However, under a severe stress scenario, it may ncrease to 11.0 per cent by March 2017.”
As for the private sector banks ((PVBs), the situation is not as bad, the RBI says: “Under the baseline scenario, the GNPA ratio of PVBs may increase to 3.1 per cent by March 2017 from 2.7 per cent as of March 2016, which could further increase to 4.2 per cent under a severe stress scenario.”
The RBI further said, “A macro stress test of sectoral credit risk revealed that in a severe stress scenario, among the select seven sectors, iron and steel industry (which had the highest GNPA ratio at 30.4 per cent as of March 2016) could see its GNPA ratio moving up to 33.6 per cent by March 2017 followed by engineering (from 10.9 per cent to 15.9 per cent) and infrastructure (from 7.1 per cent to 13.4 per cent)”. RBI data also show that, contrary to the general belief, GNPAs in agriculture the lowest all other sectors, suggesting, farmers – despite higher risks – service their debts much better than industrialists.

Comments

TRENDING

Modi, Shah 'forget': Gandhi’s first Satyagraha was against citizenship law of South Africa

By Nachiketa Desai*
Hindu fanatic Nathuram Godse assassinated Mahatma Gandhi once on January 30, 1948 but his followers raising the war cry of ‘Jai Sriram’ are killing the Mahatma every day. In his home state of Gujarat, Gandhiji was killed a thousand times in 2002 when over 2,000 Muslims were butchered, their women raped, homes and shops plundered and set on fire and even unborn babies ripped out of the wombs of their mothers.

Union Budget 'moves away' from Right to Education, 1.3 lakh schools closed down

By Dr Aparajita Sharma*
It was a shocking reply by the Union human resource development minister to a question raised in Parliament on closure of schools in a country where lakhs of children are still out of school. On December 2, the minister, Ramesh Pokhriyal ‘Nishank’, told Lok Sabha that the NITI Aayog’s education project, Sath-E, has led to 35,996 schools of different levels being merged in Madhya Pradesh, 4,312 in Jharkhand and 1,803 in Odisha. NITI Aayog is the Central Government’s policy think-tank.

CAA-NPR-NRC will 'target' 99% homeless, who are without birth certificates: NCU

Counterview Desk
Claiming to base on a survey in five states (Andhra Pradesh, Bihar, Jharkhand, Maharashtra and Tamil Nadu), which finds that over 99% of the homeless people do not have birth certificates, a civil rights organization which networks activists, researchers, urban practioners, lawyers, informal sector workers, has claimed that the Citizenship Amendment Act (CAA), as also the proposed National Register of Citizens (NRC) and the National Population Register (NPR), are likely to adversely impact this section the most.

Modi 'warned': Will not remain silent when women are labelled terrorists and traitors

Counterview Desk
As many as 13 women's rights organizations and 162 individuals have issued an open letter to Prime Minister Narendra Modi stating that in the light of hate speeches during Delhi elections, especially directed against women, it is his "Constitutional duty to protect all citizens" and tell his partymen "to fight the elections in a manner that upholds the Constitution, not one that increases the fear and insecurity among women."

Savarkar 'criminally betrayed' Netaji and his INA by siding with the British rulers

By Shamsul Islam*
RSS-BJP rulers of India have been trying to show off as great fans of Netaji. But Indians must know what role ideological parents of today's RSS/BJP played against Netaji and Indian National Army (INA). The Hindu Mahasabha and RSS which always had prominent lawyers on their rolls made no attempt to defend the INA accused at Red Fort trials.

Savarkar in Ahmedabad 'declared' two-nation theory in 1937, Jinnah followed 3 years later

By Our Representative
One of the top freedom fighters whom BJP and Prime Minister Narendra Modi revere the most, Vinayak Damodar Savarkar, was also a great supporter of the two nation theory for India, one for Hindus another for Muslims, claims a new expose on the man who is also known to be the original proponent of the concept of Hindutva.

Mystery around Gujarat PSU 'transfer' of Rs 250 crore to Canadian firm Karnalyte

By AK Luke, IAS (Retd)*
While returning from a Board meeting of the Oil India Limited (OIL) in Ahmedabad some time in 2012, two officers of the Gujarat State Fertilizers and Chemicals Ltd (GSFC), Nanavaty and Patel,  saw me off at the airport. They said they were proceeding to Canada in connection with a project GSFC had entered into with a company there. As we were running late, I hastily wished them the best.

Anti-CAA: Mallika Sarabhai joins students, faculty to protest dy CM's 'divisive' talk

By Our Representative
Taking strong exception to deputy chief minister Nitin Patel’s statement against those protesting against the Citizenship Amendment Act (CAA) and the proposed National Register of Citizens (NRC), well-known danseuse Mallika Sarabhai has joined tens of activists and students and faculty of Gujarat University, CEPT University, Indian Institute of Management-Ahmedabad, Gujarat Vidyapeeth and Nirma University to say that they are seeking “azadi” from the fascist and communal forces of the country.

Law 'governing' world's tallest Statue of Unity refers to local tribals as occupiers

By Rohit Prajapati, Krishnakant*
The recently enacted Statue of Unity (SoU) Area Development and Tourism Governance Act, 2019 in Gujarat comes amidst a terrifying atmosphere of intimidation, house arrests, detentions and FIRs, not to mention the overarching implementation of Section 144 across the state.