NPA additions decline in Q2, but concerns remain
Additions to the banking sector’s bad loans slowed in the second quarter on a sequential basis, but analysts fear that the industry is still not at the bottom of the problem. Thirty-eight listed banks that reported September quarter earnings posted a 1.32% rise in aggregate gross bad loans to ₹8.40 lakh crore from a quarter earlier, data compiled by Mint shows.
The increase is 18.98% when compared with the same quarter a year ago. Of this, ₹7.34 lakh crore belongs to public sector banks.
The jump in bad loans has been higher in case of private banks as compared to stateowned lenders. Among private lenders, Axis Bank and Yes Bank reported a rise in bad loans because the RBI’s risk-based supervision pointed out divergence in reporting of bad loans.
For Axis Bank, the divergence in gross bad loans — the difference between RBI’s assessment and that reported by the lender—stood at ₹5,630 crore at the end March 2017. The bank recognised such divergence and reclassified nine accounts with outstanding balance of ₹4,867 crore as non-performing assets (NPAs) in the second quarter.
The RBI’s assessment of Yes Bank’s gross bad loans was ₹6,355.20 crore more than what the lender had reported at the end of March. However, only ₹1,219.4 crore were classified as NPAs because it either received payments or upgraded other accounts.
ICICI Bank and State Bank of India are awaiting RBI’s inspection report.
“As the RBI completes its supervision, there could be some nasty surprises in the third quarter results, in terms of higher slippages. This will lead to higher credit cost and keep pressure on profitability,” said a banking analyst with a Mumbai-based broking house.
According to Udit Kariwala, senior analyst at India Ratings, in the previous inspection by the RBI, divergence in case of PSU banks was less compared to private sector banks. “But that does not mean there is no unrecognised stress left on balance sheets because a large book of restructured loans, especially from infrastructure and power sectors, could slip into NPA. Some slippages could emanate from most of the SDR (strategic debt restructuring) cases, where banks have not been able to find buyers in the 18-month period and would be forced to recognise it as NPA.”
Eleven of the 21 public sector banks reported a cumulative loss of ₹8,047 crore in Q2.
MUMBAI: