Banks’ gross NPAs nearly doubled to 8.7% in Q1: S.S. Mundra2 min read . Updated: 24 Aug 2016, 10:47 PM IST
RBI deputy governor S.S. Mundra says stressed assets of public sector banks have jumped to 15.4% in the June quarter as against 14.4% in March 2016
Mumbai: Reserve Bank of India (RBI) deputy governor S.S. Mundra on Wednesday said the level of stressed advances in the banking sector has risen to 12% as gross non-performing assets (NPAs) nearly doubled to 8.7% in the June quarter.
System-level stressed advances, which includes gross NPAs and restructured standard advances during March 2016, were 11.4%, while they were 10.9% as of March 2015.
Reeling out the numbers, he said stressed assets of public sector banks have jumped to 15.4% in the June quarter as against 14.4% in March 2016 and 13.2% in March 2015.
“The level of stressed advances, which include NPAs and restructured assets for the industry, is around 12%, but for the public sector banks it is around 15.4% as of June 2016," Mundra said at a banking event.
Gross non-performing assets of scheduled commercial banks almost doubled to 8.7% in the quarter to June compared to 4.6% in March 2015 and 7.8% in March 2016, led by public sector banks.
The situation in public sector banks was the worst with their bad loans jumping to 11.3% in June 2016 from 9.8% in March 2016 and 5.4% in March 2015, he said.
Private sector lenders’ bad loans were at 2.8% in June as against 2.7% in March 2016, and 2.2% in March 2015. But the foreign players bettered their asset quality as their gross NPAs improved to 3.7% in June 2016 from 4.2% and 3.2%, respectively in March 2016 and March 2015.
In the financial year to March 2016, banks’ profitability dropped a whopping 59% to ₹ 32,285 crore from ₹ 79,465 crore a year ago, hit by higher non performing assets.
State-run banks reported a net loss of ₹ 20,006 crore in the financial year ended 2015-16 as against a profit of ₹ 30,869 crore. Private sectors players net profit marginally increased to ₹ 39,672 crore in March 2016 from ₹ 35,832 crore in March 2015.
Foreign banks’ profitability slightly declined to ₹ 12,619 crore in March from ₹ 12,764 crore last year.
“To be fair to the sector, some of the events were external and hence not in control of the bank management," Mundra said.
Provisions for bad loans soared 131% to ₹ 1,70,630 crore during 2015-16 from ₹ 73,887 crore in 2014-15. State-run banks’ provisions for bad loans jumped 150% to ₹ 1,44,608 crore from ₹ 57,842 crore.
Mundra said the recent performance of the banking sector has taught an unambiguous lessons that in the absence of strong structural and governance reforms, consistency of the performance would always remain susceptible to such events. “There is a need for structural and governance reforms," he said, adding for the private sector banks such reforms have to be focused on misaligned incentives and compensation.