Banks, especially those in the public sector, continued to see huge accretion to their bad loan portfolios as a sub-5 per cent economic growth has led more enterprises to default on their loans.
Bad loans have grown faster for the 40 listed banks in the country in the October-December quarter, according to NPAsource.com, an online bad loan monitoring portal. Bulk of this addition in non-performing assets (NPAs) is on account of non-repayment of loans by large and mid-size companies.
Bad loans grew 35 per cent in the nine months ended December 31 compared with 27 per cent in the first six months of the current fiscal. Data retrieved from BSE by NPAsource.com shows that the gross NPAs of the 40-listed banks have increased to ₹2.43-lakh crore from about ₹1.80-lakh crore as of March 31, 2013.
Even after adjusting for provisions, bad loans in the nine-month period for these 40-listed banks increased 49 per cent to ₹1.38-lakh crore.
The Finance Ministry and the RBI have repeatedly asked banks to adopt a tough stance against defaulting companies by selling pledged assets and changing managements to recover bad loans. Despite this, bad loans for the listed banks have grown by more than a third in the first nine months of the current financial year.
“The economic slowdown, coupled with political uncertainty, is delaying the investment cycle for corporates. In such a scenario, the liquidity gets challenged and the efficiency gains may take time to pick up,” said Monish Shah, Senior Director of Deloitte India, a consultancy.
About two-thirds of these bad loans are contributed by nine public sector banks, including State Bank of India, Punjab National Bank, Bank of Baroda, and one private sector bank – ICICI Bank.
Among the top banks, SBI, the country’s largest lender, accounts for 28 per cent of the total bad loans, followed by Punjab National Bank at 7 per cent.
At the recent results press conference, Arundhati Bhattacharya, Chairperson of SBI, said: “I cannot say this is the end (of stress in loans)…To see the stress reducing, you need to give at least two quarters after the GDP turns around. But with the GDP going nowhere and IIP (factory output) actually tanking, it’s difficult to see an end to this stress.”
Rajeev Rishi, Chairman and MD of Central Bank of India, said: “It should take about a year to see NPAs at comfortable levels. Perhaps FY2013-14 should be the worst year and FY15 should see things shaping better.”