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

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.”

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.”

PSBs: Public Sector Banks; PVBs: Private Sector Banks; FBs: Foreign Banks

“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

Dalit rights and political tensions: Why is Mevani at odds with Congress leadership?

While I have known Jignesh Mevani, one of the dozen-odd Congress MLAs from Gujarat, ever since my Gandhinagar days—when he was a young activist aligned with well-known human rights lawyer Mukul Sinha’s organisation, Jan Sangharsh Manch—he became famous following the July 2016 Una Dalit atrocity, in which seven members of a family were brutally assaulted by self-proclaimed cow vigilantes while skinning a dead cow, a traditional occupation among Dalits.

Powering pollution, heating homes: Why are Delhi residents opposing incineration-based waste management

While going through the 50-odd-page report Burning Waste, Warming Cities? Waste-to-Energy (WTE) Incineration and Urban Heat in Delhi , authored by Chythenyen Devika Kulasekaran of the well-known advocacy group Centre for Financial Accountability, I came across a reference to Sukhdev Vihar — a place where I lived for almost a decade before moving to Moscow in 1986 as the foreign correspondent of the daily Patriot and weekly Link .

Boeing 787 under scrutiny again after Ahmedabad crash: Whistleblower warnings resurface

A heart-wrenching tragedy has taken place in Ahmedabad. As widely reported, a Boeing 787 Dreamliner plane crashed shortly after taking off from the city’s airport, currently operated by India’s top tycoon, Gautam Adani. The aircraft was carrying 230 passengers and 12 crew members. As expected, the crash has led to an outpouring of grief across the country. At the same time, there have been demands for the resignation of Prime Minister Narendra Modi, Home Minister Amit Shah, and the Civil Aviation Minister.

Ahmedabad's civic chaos: Drainage woes, waterlogging, and the illusion of Olympic dreams

In response to my blog on overflowing gutter lines at several spots in Ahmedabad's Vejalpur, a heavily populated area, a close acquaintance informed me that it's not just the middle-class housing societies that are affected by the nuisance. Preeti Das, who lives in a posh locality in what is fashionably called the SoBo area, tells me, "Things are worse in our society, Applewood."

Global NGO slams India for media clampdown during conflict, downplays Pakistan

A global civil rights group, Civicus has taken strong exception to how critical commentaries during the “recent conflict” with Pakistan were censored in India, with journalists getting “targeted”. I have no quarrel with the Civicus view, as the facts mentioned in it are all true.

Whither SCOPE? Twelve years on, Gujarat’s official English remains frozen in time

While writing my previous blog on how and why Narendra Modi went out of his way to promote English when he was Gujarat chief minister — despite opposition from people in the Sangh Parivar — I came across an interesting write-up by Aakar Patel, a well-known name among journalists and civil society circles.

Remembering Vijay Rupani: A quiet BJP leader who listened beyond party lines

Late evening on June 12, a senior sociologist of Indian origin, who lives in Vienna, asked me a pointed question: Of the 241 persons who died as a result of the devastating plane crash in Ahmedabad the other day, did I know anyone? I had no hesitation in telling her: former Gujarat chief minister Vijay Rupani, whom I described to her as "one of the more sensible persons in the BJP leadership."

A conman, a demolition man: How 'prominent' scribes are defending Pritish Nandy

How to defend Pritish Nandy? That’s the big question some of his so-called fans seem to ponder, especially amidst sharp criticism of his alleged insensitivity during his journalistic career. One such incident involved the theft and publication of the birth certificate of Masaba Gupta, daughter of actor Neena Gupta, in the Illustrated Weekly of India, which Nandy was editing at the time. He reportedly did this to uncover the identity of Masaba’s father.

Why India’s renewable energy sector struggles under 2,735 compliance hurdles

Recently, during a conversation with an industry representative, I was told how easy it is to set up a startup in Singapore compared to India. This gentleman, who had recently visited Singapore, explained that one of the key reasons Indians living in the Southeast Asian nation prefer establishing startups there is because the government is “extremely supportive” when it comes to obtaining clearances. “They don’t want to shift operations to India due to the large number of bureaucratic hurdles,” he remarked.

Search This Blog