Ernst Pegs Npas 50% Higher At $25 Billion

The non-performing assets (NPAs) of Indian banks and financial institutions stand at $25 billion (about Rs 1.23 lakh crore), as per the estimates of consultancy firm Ernst & Young. This, however, does not include the NPAs of co-operative banks and state-level financial institutions.

The Ernst & Young estimate of NPAs in the country is almost 50 per cent higher than the estimate of $16.7 billion made by the Reserve Bank of India in its last annual report.

Ernst & Young has also estimated that NPAs in India are 16 per cent of the total loans given out by banks and financial institutions, as against 10.7 per cent reported by the government. In addition, these NPAs are 14 per cent of the country's gross domestic product, the consultancy firm says.

 

These are the findings of a latest report prepared by Ernst & Young on NPAs in the Asia Pacific region including countries like Japan, China, South Korea, Indonesia and Thailand, apart from India. It is for the first time that such a study covers India. Japan topped the list of countries with NPAs of $1,243 billion, followed by China ($480 billion) and South Korea ($104 billion). The total NPAs in the region are estimated at $2,000 billion.

"From an Indian standpoint, we see the recent NPA resolution and asset reconstruction initiatives by the regulators as momentous," Ernst & Yong India chairman and managing partner Kashi N. Memani said.

The report also says that opportunity funds (which buy out the NPAs from banks and financial institutions and then recover the dues) have brought in $20 billion into the Asia Pacific region, with $16 billion being pumped into Japan alone. The report says that these funds have earned returns ranging from 20 per cent to 30 per cent on their investments.

It also transpires that with the passage of time, banks and financial instituions are able to get a better price for the NPAs sold to these opportunity funds.

Ernst & Young plans to play a significant role in the business in India. A team has been put together under the corporate finance practice of the firm to formulate business strategies.