Slow credit offtake has not helped banks decrease NPAs: Assocham

Slow credit offtake has not helped banks decrease NPAs: Assocham

New Delhi: In spite of the high interest rates slowing down credit offtake, banks have not witnessed any major reduction in their non-performing assets, an Assocham survey has revealed.

Despite slowdown of credit growth in the banking sector, the reduction in NPAs have taken a beating. In fact, some banks like ICICI Bank and Centrurion Bank of Punjab witnessed increase in their bad debts, Assocham said in a study.

The possible reasons for the diminishing asset quality could be that the markets are buoyant, excessive optimism reigns and customers are misguided into over-stretching themselves, the study “Assocham Eco Pulse" said.

The competition for market share among banks, who feel compelled to justify the high market capitalization, may also contribute to the rising bad loans, it said.

Average growth in advances by nine major banks, including the country’s largest lender SBI and the largest private sector bank ICICI Bank, picked up for the study has slowed down to 45% in the second quarter of 2007-08, against 53% in the same period last year.

“The decline in the credit growth remains one of the major factors responsible for the slowdown in industrial production in second quarter of this fiscal", Assocham president Venugopal Dhoot said.