Banks may have to put up with soaring non-performing asset levels for another year, as grim economic conditions will continue to snip profitability of companies.

However, the situation is not yet “alarming” for Indian banks, as they are sufficiently cushioned by capital adequacy. But the alarm bells are ringing.

This was the dominant view at a panel discussion organised by the Indian School of Business on the banking sector.

R. Venkatachalam, Deputy Managing Director of State Bank of India, felt the worst is over as far as NPAs are concerned for the Indian banking industry. “There are indications of NPA levels dipping and that we are on a recovery path,” he said.

He was, however, countered by Piyush Agrawal, MD and Country Risk Head of Citibank India, P. Rudran, CEO of Asset Reconstruction Company of India Ltd, and Ehsan Syed, Director, India Ratings and Research, a Fitch Group company.

Piyush made it clear that he was not “as bullish” as Venkatachalam on this, adding that the industry may see “some real (positive) action” only after twelve months.

Rudran was also emphatic that the worst is not over year. “Take the power sector — all gas-based projects are suffering. Telecom industry has not yet become an NPA, but the time is not far off. Unless the economy showed positive signs of improvement, the NPA levels will not come down,” he said.

The bad assets with Indian banks have doubled in the three years from Rs 68,000 to Rs 137,000 crore, while restructured assets almost trebled during the period from Rs 75,000 to Rs 218,000 crore.

Almost 90 per cent of the loan re-structuring was done by PSU banks. In the last three years, PSU banks notched up a 9.5 per cent increase in their loans, but their restructured assets rose 48 per cent.

> amitmitra@thehindu.co.in

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