NPA is­sue may be over for most banks: CARE Rat­ings

The Hindu Business Line - - BANKING -

With most banks re­port­ing a de­cline in bad loans in the sec­ond quar­ter of the fis­cal, a new re­port by CARE Rat­ings says that the NPA cy­cle of most lenders may have now peaked and the recog­ni­tion is­sue ad­dressed.

“The over­all pic­ture is mixed and there are signs that for the ma­jor­ity of th­ese banks, the worst of the NPA is­sue is over, and that the ra­tios could come down in the com­ing quar­ters,” said CARE Rat­ings on Fri­day, adding that the re­stric­tions on lend­ing on PCA banks also helped im­prove the over­all per­for­mance to some ex­tent.

NPA ra­tio peaked in the fourth quar­ter of 2017-18 at 10.16 per cent, which was when the high­est quan­tum of bad loans was recog­nised, ac­cord­ing to the study on trends in move­ments in NPA.

Since then, it has moder­ated and was down to 9.41 per cent in the sec­ond quar­ter of the fis­cal, ac­cord­ing to CARE Rat­ings.

Pro­vi­sion­ing

Sim­i­larly, while pro­vi­sions had peaked in the fourth quar­ter of the fis­cal at ₹1.23 lakh crore with al­most all banks wit­ness­ing an in­crease over the third quar­ter, the sit­u­a­tion seems to have changed in the cur­rent fis­cal. Pro­vi­sions in the first quar­ter of 2018-19 came down to ₹57,610 crore and to 50,714 crore in the sec­ond quar­ter of the fis­cal, the study of 30 banks found.

In the case of 13 banks, in­clud­ing State Bank of In­dia and ICICI Bank, the NPA ra­tio has de­clined in the last two or more suc­ces­sive quar­ters.

Sim­i­larly, for eight banks, in­clud­ing Bank of Bar­oda and Bank of Ma­ha­rash­tra, the ra­tio for the July to Septem­ber quar­ter 2018 was lower than that of the first quar­ter, the re­port said, adding that it would have to be mon­i­tored to see whether the end of the NPA cy­cle has reached.

“While it can­not be said with any cer­tainty that de­clin­ing NPA ra­tios in Q2-FY19 in­di­cate a turn­around, a thumb rule can be that two suc­ces­sive quar­ters of de­clin­ing NPA ra­tio can give con­fi­dence that the ra­tio will not in­crease in the com­ing quar­ters,” the re­port said.

Among the new pri­vate banks, HDFC Bank (1.33 per cent), In­dusInd Bank (1.09 per cent), Ko­tak Mahin­dra Bank (2.15 per cent) and RBL Bank (1.4 per cent) have the low­est NPA ra­tios, which have been un­der con­trol and were de­clin­ing over the quar­ters.

Mean­while, Axis Bank and ICICI Bank have re­duced their NPAs in the last two quar­ters.

In the case of the 12 pub­lic sec­tor lenders, only two have NPA ra­tio of less than 10 per cent: Vijaya Bank with 5.86 per cent and SBI at 9.95 per cent.

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