 "NPAs in retail and MSMEs rise to 7.3% for public sector banks in Q1")
Gross non-performing assets (GNPAs) on retail and MSME loan books of public sector banks rose to 7.28 per cent in June 2021 from about 6 per cent a year ago.
The incidence of bad loans was lower for private banks with GNPAs at 3.32 per cent in June, up from 2.01 per cent year ago, according to CARE Ratings.
The current level of NPAs masks the pain due to restructuring done under regulatory packages in 2020 and this year, bankers said.
In State Bank of India’s case, it has restructured loans about Rs 20,000 crore, of which retail personal loans are about Rs 9,000 crore and those of SMEs (small and medium enterprises) at Rs 3,630 crore.
The regulators and government have put in place relief packages to help lenders as well as borrowers affected due to the lockdown. Some of these measures include a blanket moratorium on repayment for six months from March 2020 to August 2020, the emergency credit line guarantee scheme for small borrowers, and the National Asset Reconstruction Company Ltd to take over bad assets of the banks.
During Q1FY22, there was the second Covid wave, leading to many states imposing lockdown restrictions. Apart from the impact on economic activities and the income generation of borrowers, collection was hit because many lenders, concerned over the health of their staff, shut branches. Within retail, unsecured portions like personal loans have seen substantial delinquencies. As a result, Q1FY22 witnessed a rise in NPAs, especially in the retail and MSME segments.
The rating agency said as compared to the first wave when the RBI allowed a blanket moratorium, there was no blanket moratorium this time, resulting in a spike in slippages during the quarter. There was a rise in NPAs in the retail and MSME (micro, small, and medium enterprises) segments in public and private sector banks.
The rise in slippages and restructuring indicates a stress build-up in the retail segment after Covid-19, especially after the second wave. With an absence of a blanket moratorium this time around, the banks either had to restructure or take the slippage on their books.
The incidence of bad loans was lower for private banks with GNPAs at 3.32 per cent in June, up from 2.01 per cent year ago, according to CARE Ratings.
The current level of NPAs masks the pain due to restructuring done under regulatory packages in 2020 and this year, bankers said.
In State Bank of India’s case, it has restructured loans about Rs 20,000 crore, of which retail personal loans are about Rs 9,000 crore and those of SMEs (small and medium enterprises) at Rs 3,630 crore.
The regulators and government have put in place relief packages to help lenders as well as borrowers affected due to the lockdown. Some of these measures include a blanket moratorium on repayment for six months from March 2020 to August 2020, the emergency credit line guarantee scheme for small borrowers, and the National Asset Reconstruction Company Ltd to take over bad assets of the banks.
During Q1FY22, there was the second Covid wave, leading to many states imposing lockdown restrictions. Apart from the impact on economic activities and the income generation of borrowers, collection was hit because many lenders, concerned over the health of their staff, shut branches. Within retail, unsecured portions like personal loans have seen substantial delinquencies. As a result, Q1FY22 witnessed a rise in NPAs, especially in the retail and MSME segments.
The rating agency said as compared to the first wave when the RBI allowed a blanket moratorium, there was no blanket moratorium this time, resulting in a spike in slippages during the quarter. There was a rise in NPAs in the retail and MSME (micro, small, and medium enterprises) segments in public and private sector banks.
The rise in slippages and restructuring indicates a stress build-up in the retail segment after Covid-19, especially after the second wave. With an absence of a blanket moratorium this time around, the banks either had to restructure or take the slippage on their books.
One subscription. Two world-class reads.
Already subscribed? Log in
Subscribe to read the full story →*Subscribe to Business Standard digital and get complimentary access to The New York Times
Smart Quarterly
₹900
3 Months
₹300/Month
SAVE 25%
Smart Essential
₹2,700
1 Year
₹225/Month
SAVE 46%
*Complimentary New York Times access for the 2nd year will be given after 12 months
Super Saver
₹3,900
2 Years
₹162/Month
Subscribe
Renews automatically, cancel anytime
Here’s what’s included in our digital subscription plans
Exclusive premium stories online
Over 30 premium stories daily, handpicked by our editors
Complimentary Access to The New York Times
News, Games, Cooking, Audio, Wirecutter & The Athletic
Business Standard Epaper
Digital replica of our daily newspaper — with options to read, save, and share
Curated Newsletters
Insights on markets, finance, politics, tech, and more delivered to your inbox
Market Analysis & Investment Insights
In-depth market analysis & insights with access to The Smart Investor
Archives
Repository of articles and publications dating back to 1997
Ad-free Reading
Uninterrupted reading experience with no advertisements
Seamless Access Across All Devices
Access Business Standard across devices — mobile, tablet, or PC, via web or app
SAVE 25%