Banks' gross NPAs rises to 4.45% from 4.1% in 1 year: RBI

Implementation of joint lenders' forum needs further improvement, says Mundra

The banking sector's asset quality woes further worsened in the last one year, with gross non-performing asset (GNPA) ratio inching to 4.45 per cent as on March 15 this year, as compared to 4.1 per cent in March 2014, according to the latest data released by the Reserve Bank of India (RBI).

However, there are some indications that asset quality might have stabilised in the last six months of 2014-15, GNPA was 4.5 per cent as on September-end.

The latest data on asset quality was reported by RBI Deputy Governor S S Mundra in a speech last month. A copy of the speech was released by the central bank late last evening.

According to Mundra, if the portfolio of restructured assets to the gross NPA numbers rises, the number rises 'alarmingly'.

Stressed assets ratio, which is GNPA plus restructured standard advances for the system, stood at 10.9 per cent, as at the end of March, 2015 as compared to 10 per cent in March, 2014 and 10.7 per cent in September 2014.

"The level of distress is not uniform across bank groups and is more pronounced in respect of public sector banks," Mundra said.

GNPAs for public sector banks as on March 2015 stood at 5.17 per cent, while the stressed assets ratio stood at 13.2 per cent, which is nearly 230 bps more than that for the system.

The central bank had taken various steps in the last one year to tackle the problem of rising bad loans. For early recognisation of stress in the system, banks have been asked to form joint lenders' forum (JLF) to initiate the resolution mechanism. The deputy governor admitted that the implementation of JLF framework needs further improvement on the ground level.

"We have received representations from bigger lenders about non-cooperation from a few lenders. On the other hand, smaller lenders have voiced their concerns about being arm-twisted by bigger lenders," Mundra said.

"Unless, there is proper co-ordination between the interested parties, all the revival efforts are likely to fall flat," he added.

The central bank also warned that poorly managed banks' capital adequacy ratio could slip below the minimum regulatory requirement if they are unable to improve their performance.

Public sector banks, where the problem of asset quality is far more acute, are facing challenges to raise capital.

According to the latest data released by Mundra, the capital adequacy ratio of the banking system has been steadily declining and at the end of March 2015, it stood at 12.70 per cent as against 13.01 per cent in March 2014.

"Our concerns are larger in respect of the PSBs where the CAR (capital adequacy ratio) has declined to 11.24 per cent from 11.40 per cent over the last year," he said.

According to Mundra, poor valuations of bank stocks, especially the PSBs, are not helping matters either, as raising equity has become difficult.

"We feel that some of these poorly managed banks could slide below the minimum regulatory threshold of capital if they don't get their acts together soon enough," Mundra said. The minimum capital adequacy ratio that banks have to maintain is nine per cent.

The government has taken a decision to infuse capital in banks that show better efficiency in terms of return on equity and return on assets. As a result, only nine public sector banks have received capital from the government in the previous financial year.

"The need of the hour for all banks, and more specifically, in respect of the PSBs, is that capital must be conserved and utilised as efficiently as possible," Mundra added.