Public sector banks saw a sharp rise in gross non-performing assets (NPAs) and steep drop in profits in the first quarter.
For 14 of the 20 banks (excluding the SBI and its group) whose first quarter results are in, net profits were down 38 per cent. Their gross NPAs were up 42 per cent over the past one year to a level of ₹1.64 lakh crore. Large banks, such as Bank of India, Canara Bank, Bank of Baroda and Punjab National Bank saw the biggest rise in NPAs. The pain caused by bad loans may well last a few more quarters, if the recent track-record is anything to go by.
The prospect of any quick improvement in their numbers is contingent on the economy recovering fully.
Although growth forecast for this fiscal has been retained at 7.6 per cent, the slightly uncertain outlook on monsoons, the recent run of poor corporate results, lack of any pick up in investment activity, low growth in rural incomes and weak export performance, point to a few more difficult quarters for banks.
The poor state of bank balance sheets has already compelled the government to rework its recapitalisation programme. After initially announcing that fresh funds would be infused on the basis of performance rather than being need-based, the government has said that it will be allotting the first tranche of ₹10,000 crore this year to banks that are financially weak.