NPAS in retail and MSMES rise to 7.3% for PSBS in Q1
Gross non-performing assets (GNPAS) on retail and MSME loan books of public sector banks rose to 7.28 per cent in June 2021 from about 6 per cent a year ago.
The incidence of bad loans was lower for private banks with GNPAS at 3.32 per cent in June, up from 2.01 per cent year ago, according to CARE Ratings.
The current level of NPAS masks the pain due to restructuring done under regulatory packages in 2020 and this year, bankers said.
In State Bank of India’s case, it has restructured loans about ~20,000 crore, of which retail personal loans are about ~9,000 crore and those of SMES (small and medium enterprises) at ~3,630 crore.
The regulators and government have put in place relief packages to help lenders as well as borrowers affected due to the lockdown. Some of these measures include a blanket moratorium on repayment for six months from March 2020 to August 2020, the emergency credit line guarantee scheme for small borrowers, and the National Asset Reconstruction Company Ltd to take over bad assets of the banks.
During Q1FY22, there was the second Covid wave, leading to many states imposing lockdown restrictions. Apart from the impact on economic activities and the income generation of borrowers, collection was hit because many lenders, concerned over the health of their staff, shut branches. Within retail, unsecured portions like personal loans have seen substantial delinquencies. As a result, Q1FY22 witnessed a rise in NPAS, especially in the retail and MSME segments.
The rating agency said as compared to the first wave when the RBI allowed a blanket moratorium, there was no blanket moratorium this time, resulting in a spike in slippages during the quarter. There was a rise in NPAS in the retail and MSME (micro, small, and medium enterprises) segments in public and private sector banks.
The rise in slippages and restructuring indicates a stress build-up in the retail segment after Covid-19, especially after the second wave. With an absence of a blanket moratorium this time around, the banks either had to restructure or take the slippage on their books.