24% rise in banks NPAs in Q2: Assocham

The Associated Chambers of Commerce and Industry of India (Assocham) has  said that based on the non-performing assets (NPAs) and the capital adequacy  ratio (CAR) reported by the commercial banks, as an indication of their financial strength, the second quarter results of the Indian banking sector does not portray a healthy picture.

This is because the net non-performing assets have risen by an average 24 per cent, while capital adequacy ratio reduced by 2 per cent in the second quarter of current fiscal, as compared to the corresponding period last year says the Assocham Eco Pulse (AEP) study.

The Assocham study reveals that on an average 24 per cent rise in net non performing assets have been registered by 25 public sector and commercial banks during the second quarter of the FY09 as against Q2FY08.  However, the average capital adequacy ratio of the banks slipped to 12.68 per cent in Q2FY09 from 13.41 per cent in the previous year.

The analysis of the Indian banking sector was based on the quarterly results posted by 25 Indian banks on Bombay Stock Exchange (BSE) from 20th - 29th October 2008. For a macro analysis, the total 25 banks included an aggregation of 15 public sector banks (PSBs) and 10 private sector banks.

The AEP analysis of the Indian banking sector's solvency is based on two broad parameters including net non performing assets and capital adequacy ratio.

"Although, the Indian banking sector has remained insulated from the global financial crisis, the emerging trends as found in the AEP do not give positive signals", says the Assocham spokesman.

As per the AEP, the aggregate net non-performing assets (NPA) of 25 banks increased by 24.36 per cent to Rs 17,522.82 crore in second quarter of 2008-09 from Rs 15,462.84 crore in the same period of FY'08.

Karur Vysya Bank recorded maximum rise of 275.36 per cent in net NPAs in Q2FY09 with Rs 50.03 crore, as against Rs 13.33 crore in Q2-07. It was followed by HDFC bank with an increase by 139 per cent, Vijaya Bank (132 per cent), State Bank of Hyderabad (81.42 per cent) and IDBI (57 per cent).

On the contrast, seven major PSBs recorded a significant decrease in net NPAs, including Central Bank of India (-87.39 per cent), Oriental bank of Commerce (-82.18 per cent), Union Bank of India (-73.38 per cent), Dena Bank (-17.24 per cent), Bank of India (-14.80 crore), Bank of Maharashtra (-7.75 crore) and Indian Bank (-1.54 per cent) have shown improvement in net NPA levels. Whereas, among the private sector banks only South Indian Bank registered an improvement in net NPAs by -29.82 per cent.