System driven identification of bad loans has not been found robust enough in certain banks, a top RBI official said.

Though banks are taking remedial action in such cases, it does not alleviate the supervisory discomfort with this kind of situation, said HR Khan, Deputy Governor, at a recent seminar at the Institute for Development and Research in Banking Technology.

These observations assume significance as they come at a time when the banking system, especially public sector banks (PSBs), is reeling under bad loans. In September 2012, the RBI had asked banks to have a system generated segment wise information on non-performing assets and restructured assets, including data on the opening balances, additions, reductions (upgradations, actual recoveries, write-offs etc.), closing balances, provisions held, technical write-offs, etc.

In its latest financial stability report, the RBI said concerns remain over the continued weakness in asset quality as indicated by the rising trend in stressed advances ratio of scheduled commercial banks (SCBs), especially of PSBs. The gross non-performing advances (GNPAs) of SCBs as percentage of gross advances increased to 4.6 per cent from 4.5 per cent between September 2014 and March 2015.

The restructured standard advances during the period also increased, pushing up the SCBs’ stressed advances to 11.1 per cent of the total advances from 10.7 per cent.

PSBs recorded the highest level of stressed assets at 13.5 per cent of total advances as of March 2015, compared to 4.6 per cent in the case of private sector banks.

Core banking

The Deputy Governor said the quality of returns generated by the core banking solution (CBS) of the banks is not up to the mark in many cases and it is not able to provide the data in customised formats as required by the regulator/ supervisor.

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