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| Restructured assets of top 12 banks worth Rs 32,530 cr |
| BS Reporter / Mumbai Aug 10, 2009, 00:15 IST |
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The top 12 banks had restructured assets worth Rs 32,530 crore in the first quarter ended June 2009, taking their total restructured assets to nearly Rs 73,000 crore, according to data from the rating agency, CARE.
Bankers said the restructuring was done across sectors and classes of customers. All the cases were taken for processing before the end of March, in compliance with Reserve Bank of India norms.
While the number of small and medium size and retail cases were more, in value terms the large units had a bigger share. The share of big units in total restructured assets was above 70 per cent (in value terms), a senior State Bank of India official said.
The proportion of restructured assets to total advances is still within a comfortable level of four per cent. Significant variation was observed among the individual banks in the restructuring of loans, CARE said in a review. Public sector banks (PSBs) showed a higher percentage of restructured loans to total loans as compared to private sector ones. PSBs are also leading in revamping of SMEs and retail loans. It may result in lower provisioning till at least September 2010.
The top banks considered for the analysis were HDFC, ICICI, Canara, Axis, Bank of Baroda, SBI, Syndicate Bank, Bank of India, Union Bank, Central Bank, Punjab National Bank and IDBI.
RBI’s intention, while granting a one-time permission in December 2008 to restructure accounts without lowering their status, was to give a temporary breather to the banking sector and to industries suffering due to the global slowdown and weakening domestic economy.
CARE said one argument against such restructuring was that it is just a fictitious drop in bad loans or postponement of a particular period’s NPAs to another one. Accounts getting restructured by the banks may also include those incapable of revival, post recovery.
Also, if the current crisis of global and domestic slowdown deepens, then the spilled over restructured loans could turn bad.
The rating agency said the overall provisioning for NPAs was lower due to writeback of depreciation on investments. The improvement in the secondary markets and depreciation on investments (mainly mutual funds and equity) was written back during the quarter, helping banks to lower total provisioning cost.
Overall provisions charged to the profit and loss account (excluding tax), decreased by 17 per cent on a year on year basis, and 24.7 per cent on a quarter on quarter basis.
However, provisioning for NPAs increased by 3.5 times over the previous year. Thus, the reported lower provisioning during the quarter by banks was not due to improved asset quality but due to change in secondary market scenarios.
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