NPAs grew significantly in Jan-Jun: Survey

Banks with operations in India witnessed a significant rise in non-performing assets (NPAs) during the first half of 2017, according to a survey released on Thursday.

The Ficci-IBA (Federation of Indian Chambers of Commerce and IndustryIndian Banks’ Association) survey carried out for JanuaryJune revealed that NPAs in public sector banks shot up considerably, with 91 per cent respondents from such lenders reporting an increase.

Twenty public, private and foreign banks participated in the survey, which together represent 64 per cent of the banking industry, as classified by asset size. Seventy one per cent private and 50 per cent foreign bank respondents stated that their bad loans have increased during JanuaryJune. Metal, infrastructure and textile industries have recorded high level of NPAs.

In the next six months (July-December 2017), participating banks expect sectors like infrastructure, automobiles and pharmaceuticals to drive credit growth.

Lenders also expressed hope that amendment of the Banking Regulation Act along with Insolvency and Bankruptcy Code will help in resolution of stressed assets, which have ballooned in the recent past. The banks suggested easing of provisioning norms for stressed assets and strengthening of legal infrastructure to facilitate quicker disposal of bad loans cases.

“The survey has been conducted at a time when NPAs are at a worrisome position, especially for the public sector banks,” Ficci said in a statement releasing the survey.

About 35 per cent reported tightening of credit standards for large enterprises during the first half of 2017 and about 40 per cent expect further tightening in the next six months. During January-June, a majority (75 per cent) of the respondent banks have reduced their marginal cost of funds-based lending rate, with 45 per cent of banks reducing it by more than 50 basis points, aided by adequate liquidity and low cost deposits.