In bad loans, private sector banks continue to outperform public sector peers. A comparison between 17 private sector banks operating in the country and 25 public sector banks shows that private sector banks performed better in terms of net non-performing assets (NNPA) growth during the third quarter of the current fiscal.
But in the case of private sector banks, NNPA to total advances ratio at the aggregate level showed an increase during the period under review compared to the same period last year. In the case of PSBs, NNPA to total advances ratio showed a significant increase. But the ratio was higher in magnitude in private sector banks compared to PSBs during both the time period.
The aggregate total income of 17 private sector banks decreased from Rs 27,323 crore in Q3 FY09 to Rs 24,505 crore in Q3 FY10, down 10.3%. Their total NNPA increased marginally by 4.1% during the period under review, increasing the NNPA to total advances ratio from 1.08% in Q3 FY09 to 1.34% in Q3 FY10.
State-run banks, in contrast, appeared less concerned about bad loans. It has achieved a 2.7% growth in total income during the period under review and the NNPA increased by 49.7% to Rs 26,933 crore during October-December 2009 from Rs 17,991 crore during October-December 2008. The NNPA to total advances ratio rose from 0.72% to 0.90% in Q3 FY10.
Bank of India ED M Narendra said, “It was due to client specific problem in terms of organising the liquidity. Also, in terms of high debt, but the internal accrual is not sufficient to service the debt. In normal boom period, there has been better cash flow on account of better sales and better profit. Some of them are yet to pick up their individual business. It is despite the fact that the industry as a whole has been doing well now. There is a technical reason too. The companies couldn’t comply with restructure terms, hence, they have been classified as NPAs.?
Significant increase in the ratio was seen in Bank of Maharashtra. The NNPA to total advances ratio of Bank Of Maharashtra rose to 1.73% in October-December 2009. Union Bank?s ratio increased significantly from 0.14% in October-December ’08 to 0.58% in October-December ’09. Bank of India?s ratio increased from 0.52% to 1.03% during the above period.
SBI registered an increase of 61.5% in NNPA where as ICICI Bank showed -1.0% decrease in NNPA. Among private sector banks, Lakshmi Vilas Bank showed significant increase in the ratio. The NNPA to total advances ratio rose from 1.47% in Q3 FY09 to 4.17% inQ3 FY10. Similarly, in the case of DCB, the ratio improved to 4.35% in Q3 FY10.
One interesting thing is that all private banks except seven showed a rise in NNPA during Oct-Dec 2009, while 84% of PSBs showed an increase in the NNPA during the same period.
