Listed banks; NPAs swell by over Rs 5,000 cr in Apr-June

But bankers assert the worst is behind them.

The economy may well be on a sound road to recovery, but banks continue to see addition of bad loans to their kitty. In particular, listed banks saw gross non-performing assets (NPAs) grow by over Rs 5,100 crore in the April-June period of the current financial year.

State Bank of India, bellwether of the Indian banking system, saw the highest growth, of Rs 1,290 crore in gross NPAs, partly due to slippage in restructured advances. At end-June, its gross NPAs were Rs 20,825 crore. Bankers, however, maintain the turnaround in the economy has changed the business environment and assert the worst – in terms of additions to NPAs – is behind them. Economic growth is on a rebound. This translates into more demand and better financial conditions, they say, providing the basis for prompt repayment of loan installments.
 

IN THE NPA NEXUS BANKS WITH BIGGEST RISE IN GROSS NPAS
In Rs crore Bank name	Gross non performing assets

Mar ‘10Jun ‘10Change State Bank of India19,534.8920,825.221,290.33 IDBI Bank2,129.382,640.15510.77 Indian Bank510.10988.37478.27 Punjab National Bank3,214.413,613.76399.35 ICICI Bank9,480.659,829.03348.38 Total (38 banks)74,597.5779,713.445,115.87 Compiled by BS Research Bureau                                                 Source Capitaline

Banks are cautious on the performance of restructured assets. In the aftermath of the global financial crisis, the Reserve Bank of India had, in December 2008, allowed banks to restructure loans to units which were viable but facing temporary cash flow problems. They were allowed to treat such loans as standard assets. In the case of SBI, of the total standard assets of Rs 16,796 crore so restructured, Rs 1,774 crore had slipped into the NPA category up to June (additional Rs 158 crore in April-June).  IDBI Bank’s credit profile also showed strain as restructured accounts turned into NPAs. Gross NPAs grew by Rs 511 crore in the three months ended June, to Rs 2,640 crore from Rs 1,748 crore a year earlier at the same period.

Karthik Srinivasan, co-head of financial sector rating at Icra, the credit rating agency, said : “Things have become better. Though, it is early to say they have stabilised.”

Rupa Rege-Nitsure, chief economist with Bank of Baroda, said there is a pattern in slippages. Generally, the extent was more in the first quarter. The business environment had improved and cash flows for the companies are good, she said.

Early this week, the Union finance minister told Parliament: “Gross NPAs are well within control. The banking system is sound.” Bipin Kabra, chief financial officer with Dhanlaxmi Bank, said: “The deterioration in assets will not be huge. But we have to be watchful for the economy, which is on rebound, to sustain the trend.”