No systemic risks from rising NPAs: RBI

Reserve Bank Deputy Governor Anand Sinha today said though bad loans are rising in the system, the central bank does not see it as a systemic risk yet.

Talking to reporters on the sidelines of Ficci-IBA summit here, he said, "We don't see any systemic risks from the current trend of rising non-performing assets. But, there could be some sectoral risks going forward."

The central bank has jacked up its key lending rate by a whopping 425 basis points in the past 15 months to batten down inflation and the banks have passed on the increased cost to borrowers.

"I would not say we are particularly worried about retail loan segment, but yes, the retail segment is the one that is likely to feel the pressure."

Banks have been witnessing rising risks from small and medium scale industries and unsecured portfolios, which primarily consist of personal loans and credit cards business, apart from the home loans front.

Bankers had told RBI Governor D Subbarao last month that there was no systemic risks as of now for banks, even as the interest rate got tightened.

Yesterday, the chief financial officer of SBI, the nation's largest lender, Diwakar Gupta said his bank's Rs 7,000 crore education loan has been witnessing pressure and the level of the stressed assets have reached 4% of this exposure.

The Kolkata-based United Bank Chairman and Managing Director Bhaskar Sen had also said there are rising risks to assets, especially from the SMEs and the retail sector, and that he may look at increasing in the tenor of the loan than increasing the EMIs.

On the impact of the Basel III on the domestic banks, especially on the state-run banks, which control over 70% of the banking assets in the domestic system, Sinha said the government will have to infuse funds into the banks to ensure that they are adequately capitalised.

Meanwhile, Crisil Ratings Director Ramaraj Pai said the 26 public sector banks would need a whopping Rs 8 lakh crore in core capital by 2019, when the Basel III norms will be implemented.

As of FY10, these banks had a core (Tier I) of capital of only Rs 70,000 crore, which is well above the Basel II requirement.