For every Rs 100 parked in shares of public sector banks, investors carry the burden of Rs 150 as bad loans, which have cumulatively ballooned to Rs 4 lakh crore or 1.5 times the market value of these lenders.
In comparison, bad loans of private sector banks are just about 6.6% of their total valuation.
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In case of PSBs, if loans that face the risk of being declared NPAs (Non Performing Assets) going ahead are also taken into account, their overall stressed advances are estimated to be almost double at over Rs 8 lakh crore.
The problem appears less acute at private sector banks as their gross NPAs are only about one-eighth at about Rs 46,000 crore, which is also well below their total market value.
The Reserve Bank has set March 2017 as deadline for banks to clean up their balance sheets, forcing them to promptly disclose NPAs, take remedial measures and also make adequate provisions in their financial statements. The banks have began complying with effect from their latest set of financial results, which are for the quarter ended December 31, 2015.
The gross NPAs of banking sector are estimated at over 5% of total loans, while overall stressed assets (including declared and potential bad loans) are at about 11%.
An analysis of their latest quarter results shows that the cumulative gross NPAs of 24 listed public sector banks, including market leader SBI and its associates, stood at Rs 3,93,035 crore as on December 31, 2015.
This is nearly 1.5-times of their total market value, which currently stands at Rs 2,62,955 crore.
This also marks a rise of over 50% from their gross NPAs totalling Rs 2,61,918 crore a year ago.
As per RBI, an asset becomes non-performing when it ceases to generate income for the bank. The banks need to declare a loan as NPA which remains overdue for more than 90 days.
Except for State Bank of India (SBI), and a few smaller ones, all listed public sector banks have gross NPAs in excess of their market capitalisation. In most cases, the quantum of bad loans is more than double the market value, while some lenders have gross NPAs as high as four or five-times of their respective market valuations.
In comparison, most private sector banks have gross NPAs well below their market values, although the quantum of bad loans have risen for them as well in a big way.
The gross NPA of 16 listed private sector lenders stood at Rs 46,271 crore as on December 30, 2015. This compares with their total market value of over Rs 7 lakh crore.
Taken together, the cumulative gross NPAs of all listed banks - public and private - has risen to Rs 4.4 lakh crore, while their total market value stands at Rs 9.6 lakh crore.