Gross NPAs of listed banks swell to Rs 5.8 lakh crore

Pain in corporate loans recognised; agriculture could be next

The gross non-performing assets (NPAs) of listed banks jumped to Rs 5.81 lakh crore in March from around Rs 3 lakh crore a year ago. Corporate loans dominated the bad loan accounts in FY16, according to data from Capitaline compiled by Business Standard's research bureau.

Analysts and bank executives said the asset quality review (AQR) by the Reserve Bank of India (RBI) across banks in 2015-16 helped get a realistic assessment of stress in the system. This led to a sharp rise in provisions for NPAs, denting bottom line at a time when interest income remained subdued.

Now, banks face the challenge of net NPAs, for which provisions are yet to be made. Vibha Batra, head of financial sector ratings at ICRA, said banks might not see repeat of large-scale slippages like last year. They, however, have a daunting task of making provisions for bad loans in the coming quarters. There is also the risk the agriculture sector showing stress in 2017. Farming activity has been hit due to bad monsoon in the past two years.

According to State Bank of India chairman Arundhati Bhattacharya, the entire impact of AQR they have taken into account. In the third quarter of FY16, there have been slippages of Rs 21,000 crore. Of this, the share of AQR was Rs 14,000 crore. In the fourth quarter, there were slippages of Rs 30,000 crore, with AQR accounting for Rs 9,000 crore.

"As much as Rs 20,000 crore worth of slippages have come from large corporate accounts. This is because several large accounts were not on our AQR list but on other banks AQRs," Bhattacharya said.

Elaborating on the AQR exercise, S S Mundra, deputy governor of RBI, had said last month that the signs of rising stress in the banking system became increasingly evident in the years beginning 2012.

The stressed assets comprising gross NPAs, restructured standard assets and written-off accounts for the banking system as a whole grew substantially. Stressed assets, 9.8 per cent of the total at the end of March 2012 moved up sharply to 14.5 per cent by December 2015. During the same period, the stressed assets for public-sector banks swelled from 11 per cent to 17.7 per cent. Global economy is passing through a difficult phase and vulnerabilities remain. So, in a globally integrated economy, a general decline in the asset quality was not totally unexpected, Mundra had said.