Private, foreign banks log lower NPAs than PSU peers

Private, foreign banks log lower NPAs than PSU peers

RBI to meet bankers today to take stock of bad loans

Somasroy Chakraborty / Mumbai February 29, 2012, 0:24 IST

At a time when slow economic growth has raised concern over the asset quality of banks and prompted the Reserve Bank of India (RBI) to take stock of bad loans in the system, data from banks showed. Foreign and private sector lenders had managed non-performing assets (NPAs) better than their state-run rivals, since the global financial crisis of 2008.

Based on their interaction with bankers, RBI Deputy Governors K C Chakrabarty (in charge of banking supervision) and Anand Sinha (in charge of banking operations and development) would prepare a report assessing the magnitude of NPAs.

 

While the data furnished by banks to RBI does not indicate any systemic issue relating to bad loans, several analysts and researchers have questioned the data, saying the projected NPA figures were likely to be higher than the central bank’s internal assessment.

“Since the reports of several stakeholders paint a picture that is not in sync with the data available with RBI, the question was were we missing something. Is the ground level situation different from what banks are telling us,” asked a source, talking about the reasons that prompted RBI to take stock of the situation.

It is learnt banks had recently submitted data on their non-performing loans, restructured assets, and slippages to RBI. Sources said the central bank was also concerned with banks’ exposure in five sectors - real estate, telecom, textile, aviation, and power — that were stressed because of the current macro-economic environment.

According to data available with Business Standard, since the financial crisis of 2008, top private and foreign banks were able to restrict growth in bad loans, even as public sector banks saw a spurt in delinquencies.

Bankers said foreign and private banks adopted a cautious approach in lending and, in many cases, curbed unsecured loan offerings that aided improvement in their asset quality ratios.

For instance, Citibank’s gross non-performing loan ratio in India improved to 2.1 per cent in 2010-11 from 4.5 per cent in 2008-09 and 3.5 per cent in 2009-10. The net non-performing loan ratio narrowed from 2.6 per cent in 2008-09 to 1.2 per cent in the last financial year. Piyush Agrawal, chief risk officer, Citi India, said, “At Citi, we promote a risk culture that continuously evaluates our lending decisions, within the confines of responsible finance. We actively stress-test our portfolio for tail risks and seek to hedge these through dynamic risk mitigation.

“The underlying India growth story is still strong. But we believe there are pockets of weakness in a few asset classes that have excess leverage. We expect this weakness to play out over the next few quarters.”

Standard Chartered Bank’s gross non-performing loans rose to Rs 1,148 crore in 2010-11 from Rs 928 crore in 2008-09. The lender has reduced its net non-performing loans from Rs 514 crore to Rs 132 crore during this period.

HOW THEY STACK UP
	Loan growth (Y-o-Y in %)			Gross NPA ratio (in %)
	FY10	FY11	1H  FY12	FY09	FY10	FY11	1H  FY12
Private banks
ICICI Bank	[-] 17	19.00	20	4.40	5.20	4.6	4.3
HDFC Bank	27	27	21	2	1.4	1.1	1.0
Axis Bank	28	36	27	1.1	1.3	1.1	1.2
Public sector banks
SBI	16	20	17	2.9	3.1	3.3	4.2
PNB	21	30	19	1.6	1.7	1.8	2.1
Bank of Baroda				1.3	1.4	1.4	1.4
Foreign banks
StandChart Bank	11	18	NA	2.5	2.6	2.3	NA
Citibank	[-] 8	11	NA	4.5	3.5	2.1	NA

	Net NPA ratio (in %)				2010-11 (% of total funded  exposure, not just loans)
	FY09	FY10	FY11	1H  FY12	Real estate	Tele- com	Infrast- ructure	Tex- tiles
Private banks
ICICI Bank	2.1	2.1	1.1	0.9	6.6	NA	10.1	0.8
HDFC Bank	0.6	0.3	0.2	0.2	3.7	1.2	2.1	1
Axis Bank	0.4	0.4	0.3	0.4	2.3	2.6	3.9	1.9
Public sector banks
SBI	1.8	1.7	1.6	2	1.3	2.1