Growth of bad loans slows as recovery increases: RBI

A recent report has shown that fresh additions to bad loans are now primarily coming from fresh loans and not from restructured assets

Reserve Bank of India Deputy Governor S S Mundra said the last few months have shown that the pace of addition of bad loans has come down at a time when recovery has picked up.

“Looking at the Q1 results two trends are quite clear: There is moderation in accretion of further NPAs (non-performing assets). The pace of further NPA formation has certainly come down. Second, most of the banks have reflected a much better recovery performance,” Mundra said.

A recent report has shown that additions to bad loans are now primarily coming from fresh loans and not from restructured assets, a change in trend as compared to the past few months, he said.

In the April-June quarter, lenders have also seen addition in NPAs from the retail, agri and the small and medium enterprises segment. Mundra said these smaller bad loans should also be treated with the same attention as the larger quantum of corporate loans.

According to the financial stability report, gross NPAs had increased to 7.6 per cent at the end of the quarter ended March from 5.1 per cent in the quarter ended September.

Mundra also cracked the whip on banks for increased instances of mis-selling. “We are getting deeply concerned about mis-selling of third-party products, especially insurance products. If we do not see improvement then the consequences can be severe,” he said.

Now, with the coming of the Unified Payments Interface (UPI), the regulator believes that bank account number portability may soon become a reality. “We believe that with certain changes in UPI this can be possible. We will see how it plays out,” Mundra said.