With the additional gross non-performing assets (NPAs) of 20 listed banks that have announced results for Q4FY16 standing at Rs 21,192 crore, the cumulative gross NPAs have crossed the Rs 1 lakh crore mark.
Gross NPAs of these banks grew by close to 23% quarter-on-quarter in the three months to March. As most of the public sector banks are yet to report their results, the quantum of gross NPAs could rise. Provisions set aside for NPAs by these banks have cumulatively risen by 24.4% Q-o-Q to R11,839.2 crore after excluding exceptional provisions made by ICICI Bank.
ICICI Bank contributed the most to fresh slippages, accounting for almost a quarter of the amount. The bank, in fact, has made an exceptional provision of Rs 3,600 crore to cushion against more loans going bad in future. The bank reported a 76% year-on-year drop in profits for the quarter.
Chanda Kochchar, MD and CEO, had observed that since steps being taken for resolution of certain large non-performing accounts in iron & steel, cement, power and mining could take time, and also given that globally recovery is gradual, the bank had thought it prudent to set aside certain reserve for exposure related to these sectors.
The rise in banks’ NPAs comes on the back of an extensive asset quality review (AQR) conducted by the Reserve Bank of India (RBI) last year, following which it had directed banks to come clean on stressed assets and make adequate provisions for them in the last two quarters of FY16.
The central bank had also asked each member of a consortium of banks to declare an account as NPA if a majority of the other members had done so.
“There are two polar approaches to loan stress. One is to apply band-aids to keep the loan current, and hope that time and growth will set the project back on track. An alternative approach is to try to put the stressed project back on track rather than simply applying band-aids. This may require deep surgery. But to do deep surgery such as restructuring or writing down loans, the bank has to recognise it has a problem – classify the asset as a non-performing asset (NPA),” RBI governor Raghuram Rajan had said.