May 05 2013 , Mumbai
The gross non-performing assets (NPA) in the banking system has come down, according the provisional data available with the Reserve Bank of India (RBI), to 3.35 per cent of gross bank advances (amounting to Rs 55,14,163 crore) down from the 3.6 per cent reported at the end of December 2012. A bank loan which is not serviced for more than 90 days is termed as non-performing and banks need to set aside capital against such bad assets. This capital buffer is called provisioning.
The Reserve Bank of India governor D Subbarao confirmed that gross non-performing assets have declined and the growth in restructured assets over the previous year have been flat, but he refused to commit a figure to the consolidated bad debt, suggesting that the estimates were provisional and would be revised once the final results of all the banks were announced.
After announcing the annual credit policy last Friday, Subbarao told Financial Chronicle, “NPAs are still a problem, but their growth is declining. At the end of December 2012, gross NPAs, at 3.69 per cent, had moved up from 3.5 per cent in March 2012. The most recent preliminary numbers for March 2013 show a decline in the gross non-performing assets.”
“NPAs have been growing continuously for the past few years. But at worst NPAs have stopped growing. Now they are flat. Even the growth in the restructured standard advances has been flat over the previous year. So, I can’t say that the NPA situation has improved dramatically, but at least, it has stopped worsening,” he said.
According to bank sources, the fall in NPAs may be due circular send by RBI on September 7, last year, asking banks to provision immediately for all the bad debt by the end of the quarter itself. Bank auditors were asked to give a letter certifying that all bad debt had adequate provisioning.
“Even when we were at the peak of the problem, we have maintained that it does not pose a systemic risk. Our banks are sufficiently capitalised to withstand shock of an NPA of this level,” governor Subbarao told this newspaper.
The gross NPAs of the banking system at the end of 2011 was Rs 97,900 crore, having grown 15.7 per cent over the previous year. At the end of March 2012, the gross NPAs had grown 45.3 per cent to Rs 142300 crore of gross advances.
RBI’s macroeconomic and monetary developments report (MMD) released on May 2, said that nearly half of the 566 central sector projects (of Rs 150 crore and above) were delayed and there had been cost overruns to the tune of 18 per cent, as on January 1. RBI estimates that a substantial portion of bank credit may be locked up in these projects.
“It is concern that bank credit may be locked up in these projects, but the bigger concern is that so much of investments is idle. That investments could have gone to productive sectors and these investments would have eased supply constraints, and that has not happened,” the governor said.
Restructuring of advances, writing off accounts, upgrading accounts and effective recoveries have been some of the methods resorted to by banks to contain the deterioration in asset quality caused by burgeoning NPAs.
The Reserve Bank of India governor D Subbarao confirmed that gross non-performing assets have declined and the growth in restructured assets over the previous year have been flat, but he refused to commit a figure to the consolidated bad debt, suggesting that the estimates were provisional and would be revised once the final results of all the banks were announced.
After announcing the annual credit policy last Friday, Subbarao told Financial Chronicle, “NPAs are still a problem, but their growth is declining. At the end of December 2012, gross NPAs, at 3.69 per cent, had moved up from 3.5 per cent in March 2012. The most recent preliminary numbers for March 2013 show a decline in the gross non-performing assets.”
“NPAs have been growing continuously for the past few years. But at worst NPAs have stopped growing. Now they are flat. Even the growth in the restructured standard advances has been flat over the previous year. So, I can’t say that the NPA situation has improved dramatically, but at least, it has stopped worsening,” he said.
According to bank sources, the fall in NPAs may be due circular send by RBI on September 7, last year, asking banks to provision immediately for all the bad debt by the end of the quarter itself. Bank auditors were asked to give a letter certifying that all bad debt had adequate provisioning.
“Even when we were at the peak of the problem, we have maintained that it does not pose a systemic risk. Our banks are sufficiently capitalised to withstand shock of an NPA of this level,” governor Subbarao told this newspaper.
The gross NPAs of the banking system at the end of 2011 was Rs 97,900 crore, having grown 15.7 per cent over the previous year. At the end of March 2012, the gross NPAs had grown 45.3 per cent to Rs 142300 crore of gross advances.
RBI’s macroeconomic and monetary developments report (MMD) released on May 2, said that nearly half of the 566 central sector projects (of Rs 150 crore and above) were delayed and there had been cost overruns to the tune of 18 per cent, as on January 1. RBI estimates that a substantial portion of bank credit may be locked up in these projects.
“It is concern that bank credit may be locked up in these projects, but the bigger concern is that so much of investments is idle. That investments could have gone to productive sectors and these investments would have eased supply constraints, and that has not happened,” the governor said.
Restructuring of advances, writing off accounts, upgrading accounts and effective recoveries have been some of the methods resorted to by banks to contain the deterioration in asset quality caused by burgeoning NPAs.
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