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Bad loans 10L cr
More bad days are ahead for the Indian banking sector as bad loans are expected to touch a whopping Rs 10 lakh crore in the fourth quarter of the last fiscal in the wake of sluggishness in the key sectors steel and textiles.
Assocham says NPAs, stressed assets of banks are set to zoom due to slowdown in key sectors
Mounting bad loans have eroded the profitability of all banks, with 11 public sector lenders reporting losses of 12,867 crore in the third quarter of last fiscal
Hyderabad: More bad days are ahead for the Indian banking sector as bad loans are expected to touch a whopping Rs 10 lakh crore in the fourth quarter of the last fiscal in the wake of sluggishness in the key sectors steel and textiles. Besides, asset quality review (ASR) that the Reserve Bank is currently undertaking is also likely to throw up new stressed assets, a report by the industry body Assocham revealed.
At the end of December, the total stressed assets - Gross Non Performing Assets (NPAs) plus restructured assets of all the banks stood at Rs 8 lakh crore, which is expected to see a significant jump in the last quarter ended on March 31, 2016. “The slowdown in certain important sectors like steel, textiles and aluminium, and the ongoing AQR by RBI may push stressed assets of the banks to Rs 10-lakh crore mark in the fourth quarter of 2015-16,” the report said.
The asset quality review undertaken by the Reserve Bank last December has resulted in a spike in bad assets with lenders recognising over Rs 1 lakh crore bad assets in the December quarter alone Total stressed assets of banks increased to Rs 7.40 lakh crore at the end of March 2015 from Rs 2.33 lakh crore in March 2011, nearly a four-fold increase in four years.
As regards the Gross NPAs, they surged to Rs 4.01 lakh crore at the end of December 2015 from Rs 2.99 lakh crore, a jump of over Rs 1 lakh crore in nine months of the current fiscal While releasing the report here, an Assocham spokesman said, “Gross NPAs of state-run banks increased from Rs 2,67,065 lakh crore in March 2015 to Rs 3,61,731 lakh crore in December 2015.
In contrast, the private sector banks’ Gross NPAs rose to Rs 39,859 crore by December from Rs 31,576 crore at the end of March 2015”. Therefore, in percentage terms, the gross NPA ratio of public sector banks (PSBs) increased sharply from 5.43 per cent as on March 2015 to 7.30 per cent on December 2015 while it was milder in case of private sector banks which saw the percentage going up to 2.36 per cent from 2.20 per cent.
The report said mounting bad loans have eroded the profitability of all banks, with 11 public sector lenders reporting losses of Rs 12,867 crore in the third quarter of last fiscal. Bank of Baroda reported a whopping loss of Rs 3,342 crore, the highest ever quarterly loss posted by any public sector bank in the industry.
IDBI Bank recorded a loss of Rs 2,184 crore while Bank of India posted a loss Rs 1,505 crore for the third quarter ended December. The fact that banks are expecting subdued last quarter numbers due to mounting bad loans was evident from their advance tax deposits.
Quoting an example, Assocham said that State Bank of India (SBI) paid an advance tax of Rs 690 crore as against Rs 1,749 crore deposited in the March quarter last fiscal, a decline in about 60 per cent. Many banks including SBI have already hinted that their financial results will likely to be equally disappointing in fourth quarter as well.
