A large chunk of fresh non-performing assets in the system consists of loans that were earlier part of the list of standard accounts in the Special Mention Account (SMA1) and SMA2 categories. An RTI query with the Reserve Bank of India (RBI) has revealed that the quantum of such emerging stress – SMA-1 and SMA-2 as on September 2016 – stood at Rs 3.12 lakh crore, almost a half of what it was in December 2015 (Rs 6.24 lakh crore).
Bankers FE spoke to said the prime reason behind such a dip is slippages into the NPA category.
The GNPA (gross non-performing advances) ratio of SCBs increased to 9.1% in September 2016 from 7.8% in March 2016.
Whereas as on September 2016, Rs 1.16 lakh crore worth of loans were classified under the SMA 1 category where repayments are overdue between 30 and 60 days, Rs 1.96 lakh crore worth of loans were classified under the SMA 2 category where repayments are overdue between 61 and 90 days.
According to the latest Financial Stability Report (FSR) released by the RBI, provisioning for NPAs more than doubled on account of improved recognition of non-performing assets.
This led to a more than 60% drop in net profit for the banking sector as a whole though it remained in thepositive zone.
The FSR also said the amount recovered by all banks during 2015-16 reduced to Rs 22,768 crore as against Rs 30,792 crore during the previous year. Public sector banks, burdened with a significant share of the NPAs, could recover only Rs 19,757 crore, as against Rs 27,849 crore during the previous year, the report said.
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Analysts expect stress in the banking sector to persist in the months ahead. In a note dated December 14, brokerage Kotak Institutional Equities wrote, “In our view, NPLs (non-performing loans) of Public Sector Banks (PSU) banks may have peaked and we note that their slippages, although high, have started to decline in the past 1-2 quarters. We expect the NPLs of private banks to peak by end-FY2017 leading to lower loan-loss provisions (LLPs) from FY2018.”
The author of this article is Nivedita Naidu