On Wednesday, the Reserve Bank of India said the non-performing asset ratio (NPAs) of new private sector banks increased significantly during the year, while that of foreign banks increased marginally.
?It may be noted that the increase in gross NPAs was more noticeable in respect of new private sector and foreign banks, which have been more active in the real estate and housing loans segments,? said the RBI in its report adding that the hardening of interest rates might have made the repayment of loans difficult for some borrowers, resulting in some increase in NPAs in this sector.
The gross NPAs of scheduled commercial banks increased by Rs 6,136 crore in 2007-08. This is the first time since 2001-02 that gross NPAs increased in absolute terms. In this context, it may be noted that banks had registered rapid credit growth during the previous three years. Some slippage in NPAs, therefore, could be expected. Besides, some other developments such as hardening of interest rates might have also resulted in increased NPAs. Banks had extended housing loans at floating interest rates, the central bank noted. Gross NPAs (in absolute terms) of nationalised banks and old private sector banks continued to decline during the year.
Gross NPAs of State Bank group showed an increase. Notwithstanding increase in gross NPAs of the banking sector, gross NPAs as percentage of gross advances declined further to 2.3% at end-March 2008 from 2.5% a year ago.
The trend of improvement in the asset quality of banks continued during the year. Indian banks recovered a higher amount of NPAs during 2007-08 than that during the previous year. Though the total amount recovered and written off at Rs 28, 283 crore in 2007-08 was higher than Rs 26, 243 crore in the previous year, it was lower than fresh addition of Rs34, 420 crore, NPAs, during the year, the RBI said.