Public sector banks see a jump in recoveries

NPAs- PSBs helped by a mandate from the govt to take on defaulters and a new regime for stressed assets

A mandate to take defaulters head-on and various initiatives to tackle stressed assets helped public sector banks (PSBs) improve recoveries from non-performing assets (NPAs) last financial year, Economic Survey 2013-14 has said.

"So far, steps by the government and the Reserve Bank of India have resulted in an improvement in recoveries of NPA by PSBs. These increased from Rs 9,726 crore in March 2010 to Rs 20,288 crore in March 2013 and Rs 27,623 crore in March 2014," the Survey said.

The economic slowdown and high leverage has hit many companies, leading to a rise in defaults, with the infrastructure, textiles, chemicals, iron & steel, food processing, construction and telecommunications sectors hit the hardest. A switch to system-based identification of NPAs by PSBs, a slowdown in economic growth and aggressive lending by banks during the boom period had led to the rise in NPAs, the survey said.

Overall NPAs of the banking sector increased from 2.36 per cent of total credit in March 2011 to 3.9 per cent in March 2014 (provisional). While there was an across-the-board rise in NPAs, the increase has been particularly sharp for infrastructure, with NPAs in this segment, as percentage of credit, increasing from 3.23 per cent in March 2011 to 8.22 per cent in March this year (provisional).

The survey said gross NPAs of PSBs increased nearly fourfold between March 2010 (Rs 59,972 crore) and March 2014 (Rs 2,04,249 crore). As percentage of credit, NPAs stood at 4.4 per cent in March 2014 (provisional), against 2.09 per cent in 2008-09.

The banking system's asset quality had deteriorated in the post-crisis years and among banks, PSBs had the highest NPAs and restructured advances, the survey said.