State-run banks’ GNPAs exceed their net worth

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Mumbai | Updated: May 26, 2016 8:10:37 AM

Cumulative gross non performing assets (GNPAs) for a clutch of 22 public sector banks (PSBs) at the end of March, have exceeded their combined net worth.

Cumulative gross non performing assets (GNPAs) for a clutch of 22 public sector banks (PSBs) at the end of March, have exceeded their combined net worth. While their combined net worth stood at just over Rs 3.35 lakh crore cumulative GNPAs were over Rs 3.76 lakh crore.

On top of this list  is UCO Bank, which saw its reserves dwindle by Rs 962 crore this year and is followed closely by its Kolkata twin – United Bank of India – with GNPAs now over 62% more than its networth.

Larger PSBs like Bank of Baroda and Punjab National Bank are a part of this list. The government plans to infuse Rs 70,000 crore of fresh capital in PSBs, over the next four years, to shore up  balance sheets.

Moody’s Investor Service had noted earlier that the 11 PSBs that it rates would require Rs 1.45 lakh crore of external capital between FY16 and FY19. “The front-ending of NPL recognition and provisioning results in a corresponding need to boost capital levels. Consequently, unless the government revises upwards its capital infusion plan for the banks in its upcoming budget, the banks will see negative pressure on their credit profiles,” it had noted in a report before the last Union Budget in which the government stuck to its earlier plan to infuse only Rs 25,000 crore into PSBs in FY17.

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While the surge in GNPAs in Q4 comes despite the Reserve Bank of India (RBI) taking quite a few names off the list of stressed accounts, several banks have indicated that the worst might not yet be over. Usha Ananthasubramanian, MD & CEO of Punjab National Bank (PNB), for instance, said last week that stress on the Delhi-headquartered bank’s balance sheet will continue for some more time.

“We have done a major cleaning of the balance sheet but I cannot say the worst is over. How can I say that when unanticipated events may happen which may put pressure on the bank’s assets quality?”, she said after the bank reported the highest ever quarterly net loss ever reported by a bank in India. HSBC Global Research is of the opinion that PNB’s balance sheet is more at risk than its earlier expectations.

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