Letter to BS: Several factors to continue raising concerns for Indian banks

This refers to the well-written piece, “Five banking trends for the new year” (Banker’s Trust, January 6). While there will be more non-performing asset (NPA) recovery and a slight increase in credit off-take, there are certain features which will continue to cause concern in the financial sector. Firstly, there will be fresh accretion of NPAs from problematic NBFCs/HFCs and from Mudra loans as well as retail loans going bad. 

This feature will get aggravated in an economy which is slowing down. Secondly, with fairly wide divergence in the NPAs as declared by banks and those assessed by the Reserve Bank of India in 2018-19, the high level of NPAs is not subsiding anytime soon. I am referring to some of biggest public sector banks — SBI, PNB, BoB — and private banks such as Yes Bank. Thirdly, with no AQR carried out of big NBFCs, more unpleasant surprises cannot be ruled out. 

Fourthly, the large but weak and poorly managed urban cooperative banks could spring some shocks. Lastly, the unreformed public sector banks with their governance and operational issues will continue to drag down the overall performance of the banking sector.

Arun Pasricha

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