The banking system's gross NPAs shot up to 8.5 percent by the June quarter, as against 4.6 percent a year ago. The spike was largely due to the doubling of NPAs at public sector banks to 10.4 percent compared to 5.3 percent in June 2015.
The banking sector's non-performing assets (NPA) almost doubled to 8.5 percent in the first quarter of this fiscal, driven by surging bad assets of state-run lenders, Care Ratings said. The banking system's gross NPAs shot up to 8.5 percent by the June quarter, as against 4.6 percent a year ago. The spike was largely due to the doubling of NPAs at public sector banks to 10.4 percent compared to 5.3 percent in June 2015. However, the rating agency did not quantify the bad loans in absolute terms. Private sector lenders witnessed their NPA ratio increasing to 3 percent from 2.1 percent a year ago, it added. "The state-run banks have been under pressure to identify and provide for their NPAs, which could last for another one to two quarters," the agency said, adding the high NPAs and consequent provisioning is an "area of concern" that will impact their profitability going forward. Many state-run lenders reported net losses in the June quarter, with market leader SBI turning in a 32 percent drop in net income, while private sector banks' net collectively fell just 2.6 percent. The agency said given the government's plan to raise money by offloading stakes in banks, profit is an important issue. "High NPAs and low profitability would not augur well if the government is working towards lowering its stake in these banks to 51 percent," it said. However, it termed the recognition of NPAs as a positive step in the long term as higher provisioning makes the state-run lenders better prepared to face the market.
The banking sector's non-performing assets (NPA) almost doubled to 8.5 percent in the first quarter of this fiscal, driven by surging bad assets of state-run lenders, Care Ratings said. The banking system's gross NPAs shot up to 8.5 percent by the June quarter, as against 4.6 percent a year ago. The spike was largely due to the doubling of NPAs at public sector banks to 10.4 percent compared to 5.3 percent in June 2015. However, the rating agency did not quantify the bad loans in absolute terms. Private sector lenders witnessed their NPA ratio increasing to 3 percent from 2.1 percent a year ago, it added. "The state-run banks have been under pressure to identify and provide for their NPAs, which could last for another one to two quarters," the agency said, adding the high NPAs and consequent provisioning is an "area of concern" that will impact their profitability going forward. Many state-run lenders reported net losses in the June quarter, with market leader SBI turning in a 32 percent drop in net income, while private sector banks' net collectively fell just 2.6 percent. The agency said given the government's plan to raise money by offloading stakes in banks, profit is an important issue. "High NPAs and low profitability would not augur well if the government is working towards lowering its stake in these banks to 51 percent," it said. However, it termed the recognition of NPAs as a positive step in the long term as higher provisioning makes the state-run lenders better prepared to face the market.
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