Loan waivers, NPA issues: Stay away from PSU banks for now, say analysts

Analysts advise investors to stay away from the sector despite attractive valuations in some cases

The Nifty PSU Bank index lost nearly 2% on Monday on reports that the government is considering farm loan waiver in Maharashtra, fuelling concerns that the step will put additional burden on banks that are already grappling with a high level of non-performing assets (NPA).

Over the years, 21 PSU banks have amassed Rs 6.2-lakh crore of bad assets as of March 2017, AceEquity data show, up over 48% year-on-year (y-o-y). Some of these banks, such as Indian Overseas Bank (IOB), IDBI Bank, Central Bank, UCO Bank and Bank of Maharashtra, had gross NPAs in excess of 15% of their