Crisil sees banks’ restructured assets at Rs 4 trillion by FY14-end

PTI Sep 15, 2013

MUMBAI: Sounding an alarm of the detoriating asset quality of banks, ratings agency Crisil has said gross non-performing assets will touch 4.4 per cent and the restructured book will balloon to Rs 4 lakh crore by the end of this fiscal.

“Gross NPAs (non-performing assets) were at 3.3 per cent in March 2013 and grew to 3.7 per cent by the June quarter. We feel they will grow to 4.4 per cent by March 2014,” CRISIL Managing Director and Chief Executive Roopa Kudvasaid here over the weekend.

An NPA is a debt obligation where the borrower has not paid the interest and principal repayments to the lender for an extended period of time. Corporate Debt Restructuring (CDR) allows the reorganisation of a company’s outstanding obligations.

Kudva said restructured assets, under which an account’s repayment period is extended or interest payment delayed without classifying it as an NPA, will touch Rs 4 lakh crore this fiscal, up from the Rs 3.1 lakh crore in March, 2013.

“The system will add up to Rs 1 trillion (lakh crore) of restructured assets during the fiscal and considering some assets will be reclassified during the fiscal, we feel the total component will touch Rs 4 trillion by March 2014,” Kudva said.

In its annual report released last month, the Reserve Bank of India (RBI) had said the gross NPAs in the system will touch 4.4 per cent by the end of the fiscal.

“Our stress tests suggest that under a severe stress scenario, the gross NPA ratio of banks may rise to 4.4 per cent by March 2014 but even under such a scenario the system level capital adequacy ratio of banks will be 12.2 per cent only, which is well above the required 9 per cent,” the RBI report had said.

One of the most important reasons for the rise in the asset quality stress is the economic gloom. The state-run banks have one of the most dismal records on this front, with some reporting gross NPAs of over 6 per cent.

There is also a concerted effort from the Finance Ministry to check the phenomenon of “wilful defaulters” to prevent assets slipping into the bad category.

Gross non-performing assets of nationalised banks soar

M Allirajan & Aparna Ramalingam, TNN | Aug 24, 2013,

Gross non-performing assets (NPAs) have increased sharply in public sector banks (PSBs) in the first quarter of the current financial year as a rapidly slowing economy is resulting in a quantum leap in bad loans. Gross NPAs as a percentage of advances stood at a two-and-half year high in several leading PSBs in the April-June quarter.  State Bank of India (SBI), the country’s largest lender, topped the list of banks with the highest gross NPAs (in percentage terms) during the quarter among BSE-Bankex constituents.

The gross NPA to advances for SBI, which has seen a steady increase in bad loans, surged to 5.56% in April-June, the highest since the quarter ending March 2011. Gross NPAs have increased 81 basis points (0.81%) for SBI during the quarter, data with the Centre for Monitoring Indian Economy(CMIE) showed. “The rise of bad loans is across the board. The growth has lowered,manufacturing sector is not doing that well and interest rates are going up instead of moving down. In such an environment, NPAs will only move up,” Vaibhav Agrawal, vice president,Angel Broking said. 

Gross NPA to advances surged to the highest in 10 quarters for Bank of Baroda, Canara Bankand Punjab National Bank. Incidentally, global ratings agency Moody’s downgraded the bankfinance strength ratings of Bank of Baroda, Canara Bank and Union Bank of India on August 16. Moody’s says PSBs would find it difficult to respond to slower economic growth, deteriorating asset quality and declining profit margins.  Bank of Baroda whose gross NPA stood at 2.99% at the end of the first quarter of FY14 said in an analyst call that the bank has “significantly strengthened its credit monitoring process for early detection of stress accounts .” In terms of sequential movement (from fourth quarter of FY13 to first quarter of FY14) of gross NPAs for Bank of Baroda, the share of agriculture was highest at 5.29% during the period ended June 30 as against 4.9% during the fourth quarter of FY 13. Large and medium enterprises stood second with a gross NPA ratio of 5.06% on June 30 as against 3.29% during March end.  Interestingly, private sector banks have not seen much deterioration in asset quality and have managed to maintain their NPAs at low levels. HDFC BankAxis Bank and IndusInd Bank are maintaining their gross NPAs to advances at 1% levels for the past several quarters. ICICI Bank’s gross NPAs had increased to a high of 4.47% in the quarter ending March 2011. But the bank has steadily brought it down to 3.23% in April-June, CMIE data showed. “That is because these institutions have better credit standards when compared to their nationalized counterparts,” Agrawal said.  Even south-based banks have not been spared from the NPA blues.

In the case of Indian Bank, gross NPA levels showed a rise and stood at Rs 3,723 crore as on the first quarter of FY14 while it stood at Rs 1,554 crore as on June of last year. Net NPAs also rose during the same period to Rs 2,486 crore as compared to Rs 963 crore during the same period in 2012. During the period, the bank restructured accounts in the discom sector to the tune of Rs 35.01 crore.  “We have contained our net NPA ratio at 2.3%. We have recovery strategy and action plan for the year wherein we are meeting up with the top 50 NPA borrowers every weekend to see which accounts can be upgraded and initiating recovery proceedings for others,” T M Bhasin, chairman and managing director, Indian Bank said. 

Similarly, Indian Overseas Bank also saw its bad debts rise during the first quarter of FY14. Gross NPA rose to Rs 7,431.69 in the June 2013 quarter as against Rs 4,409.70 in the corresponding quarter last year.