NPAs rise 11% to Rs 70,094cr

Sticky loans or non-performing assets (NPAs) of commercial banks are zooming despite a host of recovery measures and loan reschedulements. B...

Sticky loans or non-performing assets (NPAs) of commercial banks are zooming despite a host of recovery measures and loan reschedulements. Bad assets of scheduled commercial banks rose by 11.23 per cent to Rs 70,904 crore as on March 31, 2002 as compared to Rs 63,741 crore in the previous fiscal. This means borrowers have defaulted another Rs 7,163 crore to banks during 2001-02, indicating that the credit profile of Indian banks remains weak.

According to the Reserve Bank of India, the gross NPAs for 2001-02 includes Rs 4,512 crore on account of merger of ICICI with ICICI Bank. Private banks have proved that they are not behind public sector banks in creating NPAs. New private banks had substantial addition to their NPAs, reflecting the impact of merger during the year. “The gross NPAs of new private sector banks witnessed a substantial increase from Rs 1,617 crore as at March end 2001 to Rs 6,822 crore a year later,” RBI said in its ‘Report on trend and progress of banking in India 2001-02’.

Though the RBI revealed the gross NPAs of the banks, it did not identify the top defaulters. The RBI has so far officially disclosed only the names of defaulters against whom suits have been filed by the banks. Net NPAs in 2001-02 increased by 9.5 per cent to Rs 35,546 crore from Rs 32,461 crore as at March end 2001. There was a perceptible decline in the ratio of gross NPAs and net NPAs, measured as percentage to advances as well as assets, the report said.

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The report said NPAs of public sector banks increased marginally during the year in spite of substantial recoveries, whereas for foreign banks, recoveries exceeded accretions to NPAs. As at March-end 2002, out of 22 old private sector banks, 17 had net NPA to net advance ratio up to 10 per cent, whereas it was in excess of 10 per cent for five entities. The report said out of 40 foreign banks operating in the country, 26 banks had net NPAs to net advances ratio within 10 per cent and for as many as nine banks, this was in excess of 20 per cent.

The central bank said banks should adopt their own risk-rating systems to assess the risk of lending. RBI said from a policy perspective, it becomes imperative that a reduction in NPAs would require, both a ‘stock’ (a one time cleansing of balance sheet) and ‘flow’ (preventing substantial accretion) solution. On the legal framework, the report said delays owing to inefficiencies or bottlenecks in legal system can seriously jeopardise the debtor-creditor relationship and adversely impinge upon the smooth functioning of Financial system.

It was, therefore, important that the judicial system displays an understanding of financial transactions for banks to rely on fair and speedy enforcement of their contractual rights and obligations, the apex bank added.