"The government is saying that banks give more emphasis earlier when repayments in an account start becoming irregular, rather than waiting for 90 days when an account becomes NPA," SIDBI CMD S Muhnot said. Following government's missive, SIDBI has started the process of "intensive monitoring" of accounts where repayments start becoming irregular.
Indian banks have now moved to a system-driven recognition of NPAs, instead of manual reporting done earlier. This has led to a spike in NPAs, especially at the public sector banks. Slowdown in the economy and stress in certain sectors such as power, telecom, infrastructure and aviation have added to the NPA build up.
"NPA build up has increased for loans of less than R10 lakh. Earlier, NPAs in this segment were typically recognised by the bank branch officers, who used their discretion depending upon the credit profile and history of the customer. Now this leeway is gone with introduction of system-driven NPAs," a senior public sector banker said, asking not be named.
Gross NPAs of nationalised banks increased by 50 bps as on March 31, 2011, to 2.4% as on December 31, 2011, while those of SBI Group increased sharply by 130 basis points to 4.3% from 3.0% during this period, Icra said in a recent report. Gross NPAs of private banks moderated to 2.1% from 2.3% during the same period, it said.
Certain large corporate slippages and a sharp increase in advances to the agriculture and small & medium enterprise (SME) sectors was noted during April-December 2011. Tier I capital of PSU banks moderated to 8.3% as on December 31, 2011 from 8.7% as on March 31, 2011 as the number of banks with Tier I capital less than 8% increased to 12 as on December 31, 2011 from four as on March 31, 2011, Icra said.
The government has proposed to infuse around Rs 20,000 crore of capital in the PSU banks in 2012-13. This would boost the capital of the banks.