Asset quality of banks improves despite high interest rates

Asset quality of banks improves despite high interest rates
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First Published: Tue, May 22 2007. 03 51 PM IST
Updated: Tue, May 22 2007. 03 51 PM IST
PTI
New Delhi: Despite hardening of interest rates, majority of the banks reported a considerable improvement in their asset quality on the back of strong economic growth in the country, industry body Assocham said.
The net non-performing assets (NPAs) as a proportion of net advances of 27 scheduled commercial banks have reduced by 14% on an average during the fourth quarter of 2006-07 as compared to the corresponding period of the last year.
Federal bank, South Indian Bank, Union Bank of India with 53%, 47%, 38% decline in their net NPAs, respectively, emerged as top NPA managers, a study carried out by the chamber on ‘Financial performance of banking sector in the fourth quarter of fiscal 2006-07 said.
As a result of better monitoring of the credit portfolios and healthy macro-economic performance, most of the banks have managed to reduce their loans repayment defaults. This is despite high interest rates and strong growth in credit disbursement, said Assocham President Venugopal Dhoot.
Improved industrial climate, economic buoyancy and better recovery climate have also helped the banks in reducing the bad loans and advances.
However, ICICI Bank, the largest private sector lender in the country, recorded a whopping 38% increase in net NPAs to 0.98% in fourth quarter from 0.71% during the same period last year. Bank of India and Allahabad Bank registered 28% and 27% rise in NPAs respectively, the study added.
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First Published: Tue, May 22 2007. 03 51 PM IST
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