Credit portfolio of large borrowers shrinks, GNPAs decline: FSR report

The Reserve Bank of India (RBI), in its financial stability report (FSR) 2019, said the share of large borrowers in scheduled commercial banks’ (SCBs’) total loan portfolio reduced to 51.8 per cent in September 2019 compared to 53 per cent in March 2019.

Gross non-performing assets (GNPAs) of large borrowers stood at 79.3 per cent in September 2019 against 82.2 per cent in March 2019.  

The RBI noted that in the large borrower accounts, the proportion of funded amounts outstanding with signs of stress increased from 20.9 per cent in March 2019 to 21.2 per cent in September 2019. 

Special mention account (SMA2) loans went up by around 143 per cent between March 2019 and September 2019. The top 100 borrowers accounted for 16.4 per cent of the SCBs’ gross advances and 16.3 per cent of the GNPAs.

India’s industrial output declined 3.8 per cent in October on the back of poor performance across all sectors, according to data released by the ministry of statistics and programme implementation. 

A major reason for the decrease in the index of industrial production (IIP) is declining performance of eight core industries that comprise 40.27 per cent of the index. 

Other than that, coal and cement production also fell 17.6 per cent and 7.7 per cent, respectively, in October.

This economic slowdown can directly be related to the fact that bank lending to sectors like basic metals, chemicals, cement and fertilisers, machinery and equipment, retail and wholesale trade, information technology, oil and gas, food processing, real estate, transport, medical, educational and auto have seen a considerable decline. 

For majority of the sectors, average risk weight (loan exposure of banks) has declined between March and September 2019. This is in line with the declining average risk weight at the aggregated level.

For instance, RBI data shows that banks have reduced lending to basic metals and other sectors to 54.9 per cent in September 2019 from 60.5 per cent in March 2019. Food processing has reduced to 89.3 per cent in September 2019 from 92.7 per cent in March 2019. 

Machinery and equipment has also seen a major reduction to 69.9 per cent in September 2019 from 81.9 per cent in March 2019.