Aggregate stressed loans — the sum of non-performing assets (NPAs) and restructured debt — for banks in India rose to 12% of total assets in June, from 11.4% in March, Reserve Bank of India data showed, reports fe Bureau in Mumbai. Gross NPAs were 8.7% as a share of advances while recast loans stood at 3.3%.
Public sector banks (PSBs) reported the highest level of stressed advances at 15.4% in June, up 100 basis points (bps) over the March quarter.
Meanwhile, the situation for private sector lenders improved somewhat with the ratio slightly lower at 4.4%.
RBI deputy governor SS Mundra on Wednesday said banks’ balance sheets, which had improved in 2008, had once again worsened. The NPA ratio, which had peaked at around 12% in the late 1990s, Mundra said, had come down all the way to 2% just before 2008. However, since then, stressed assets have been on the rise partly due to the global financial crisis and also because many of the public-private partnership projects failed.
“To be fair to the sector, some of the events were external and hence not in the control of the bank managements,” Mundra added.
In June, the RBI had said in its financial stability report that stressed assets of PSBs rose 40 bps to 14.5% in March 2016 from 14.1% in September 2015.
“The immediate and overriding priority is to complete the clean up of bank balance sheets which is under way,” Mundra said, adding that the resultant provisioning coupled with meeting Basel III norms and migration to IFRS would entail recapitalisation of most of these banks.
Meanwhile, the sharp reduction in restructured standard advances ratio from 6.2% to 3.9% during the same period resulted in the overall stressed advances ratio rising marginally to 11.5% from 11.3% during the period. While PSBs continued to hold the highest level of stressed advances ratio at 14.5%, both private sector banks and foreign banks recorded stressed advances ratio at 4.5%.
On a longer term for bank chiefs, he said that continuity of top management is crucial. “When you have a bank CEO for one year or one and a half, it has its own problem and outcome. Hence, a reasonably longer tenure for a CEO is preferable, I would suggest five years if necessary,” he explained.
IR’s accounting change to accrue benefits