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Debt write-offs aided asset quality improvement

BS Reporter  |  Mumbai 

The Economic Survey said asset quality of banks improved in percentage terms in 2010-2011 from the previous year. But the improvement was due to write-offs of bad debts. “The banking sector has written off almost 10 per cent of the outstanding gross non-performing (GNPA) assets at the end of March 2010, which helped in limiting their growth of gross non-performing loans,” said the survey conducted by the ministry. The GNPAs increased in absolute terms in 2010-11 over the previous year, it added.

The survey reveals that gross NPA to gross advances ratio declined marginally to 2.3 from 2.4 per cent during the reporting period. It also said that the private and foreign sector lenders managed asset quality better than public sector counterparts.

SBI said increase in NPA are largely due to policies and regulation. “I do not think high interest rates are really responsible for rising NPAs,” Pratip Chaudhuri, chairman, SBI, told a television channel. “It has more to do with project clearances, policy and regulations.”

On if he expects the asset quality to deteriorate in the coming quarters, he replied, “The worst is over for us.”

Rating agency Care said the migration to automated NPA recognition system was also responsible for absolute rise in NPAs. “For the PSU banks, restructured assets stood at 4.78 per cent of advances; and for private sector banks, at 1.58 per cent,” said Care. The government has set September 30 as deadline for public sector banks to identify NPAs by using technology.

Cumulative slippages from the restructured portfolio for these banks averaged between 15 and 22 per cent over the past two years, Care added

Banks, more so public sector ones, are struggling to recover loans given to sectors that have seen trouble recently, such as infrastructure, power, mining, telecom, aviation and real estate.

Axis Bank, HDFC Bank, Citi, ICICI Bank have seen a considerable reduction in gross NPAs since 2009-10.

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First Published: Fri, March 16 2012. 00:19 IST