PSBs share disproportionate & increasing burden of NPAs: RBI

Banks which are more aggressive in identifying NPAs appear to be able to manage them better, Dr KC Chakrabarty said.

November 19, 2013 11:23 IST | India Infoline News Service
Deputy governor of Reserve Bank of India (RBI), KC Chakrabarty on Saturday said that banks have written off Rs.1 trillion in advances in the past 13 years from 2001 to 2013.
The RBI governor criticized the banks because 95% of these write-offs were for big borrowers.

Addressing a Bankers' conference BANCON 2013 in Mumbai on Saturday, Chakrabarty said that signs of growth recovery were visible in some sectors and urged investors to be patient and stay invested.

Public sector banks share a disproportionate and increasing burden of NPAs (non-performing assets) – especially in recent years. These banks which had 75.4% of the banking system’s NPAs now hold 86.1% of bad loans.

The banking system’s total NPAs have increased from Rs.505.13 billion in 2007 to Rs.1.93 trillion in 2013.

The total NPA plus restructured loans of public sector banks have increased to 11% of the loan book in March 2013 from 5.07% of loans in March 2009.

Banks which are more aggressive in identifying NPAs appear to be able to manage them better, Chakrabarty said.

In a detailed presentation to bankers, Chakrabarty asked banks to recognize bad loans quickly and improve risk-management and credit-appraisal systems to bring down the rate of growth in NPAs.

In 2006-07, banks became complacent when credit growth was high. In general, banks who had credit growth in 2004 -08 ended up with high NPA growth in 2008-13, he added. 
Total NPAs in the banking sector dropped from an average of 12.8% of the loan book in 1997-2001 to 3.1% in 2005-2009, but has since increased to 4.2% of the loan book in September 2013.

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