Public sector banks vs private lenders: PSBs share in loan assets falls

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Mumbai | Published: December 22, 2017 2:37:31 AM

State-owned banks’ share of loans disbursed by the banking system slipped to 69% from 71% between March 2016 and March 2017, data released by the Reserve Bank of India (RBI) showed.

Public sector banks, private lenders, loan assets,  NPAs,  banking system, SBI, NPA ratio, Private banks gross NPA ratio, Reserve Bank of IndiaThe banking sector’s total advances stood at Rs 84.7 lakh crore, 3.6% higher than the outstanding at the end of March 2016. (Reuters)

State-owned banks’ share of loans disbursed by the banking system slipped to 69% from 71% between March 2016 and March 2017, data released by the Reserve Bank of India (RBI) showed. As on March 31, 2017, public-sector banks’ advances stood at Rs 58.66 lakh crore, up 0.7% from Rs 58.27 lakh crore at the end of FY16. The banking sector’s total advances stood at Rs 84.7 lakh crore, 3.6% higher than the outstanding at the end of March 2016. The year under review saw the private-sector increase their market share to 27% of the pie from 24% on March 31, 2016. Loan outstanding for private banks as on March 31, 2017 was Rs 22.6 lakh crore, 14.5% higher than the previous year’s Rs 19.74 lakh crore. The share of foreign banks in the pie shrank by 54 basis points to 4.06%. Their total advances registered a de-growth of 8.7% to Rs 3.44 lakh crore. In terms of asset quality, public-sector banks (PSBs) accounted for a whopping 87% of gross non-performing assets (NPAs) as on March 31, 2017. This, nonetheless, marked a marginal improvement over the previous year, when their share of gross NPAs was 88%. Total gross NPAs of PSBs stood at Rs 6.85 lakh crore, or nearly 12% of their assets at the end of FY17. On March 31, 2016, their gross NPA figure was Rs 5.4 lakh crore and this made up for 9.3% of their assets.

On the other hand, the performance of private banks on asset quality worsened significantly between FY16 and FY17, with their gross NPAs jumping 64% year-on-year (y-o-y) to Rs 91,915 crore. Their share of all gross NPAs in the system rose to nearly 12% at the end of FY17 from 9% a year ago. Private banks’ gross NPA ratio rose to 4% from 2.8%. PSBs have been losing ground to their private peers in recent years as their pile of stressed assets and related provisioning requirements have left them capital-starved. While the government has announced a Rs 2.11-lakh crore recapitalisation programme for them, analysts say this amount may be insufficient.

In a recent report, Credit Suisse wrote that banks will need further capital through primary market issuances, non-core asset sales and additional capital from the government. “..even assuming a Rs 35,000-crore recap amount, growth capital available for PSUs (ex-SBI) may only be rS 7,500 crore that, by our estimate, will be adequate only to support about 2.5% growth in their loan books in FY18, compared to the 1% growth in gross loans witnessed by these banks in Q1FY18,” the investment bank said. “As opex will likely grow faster than this, profitability for these banks will continue to compress.”

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