PSU lenders bad loans rise 57%,pvt banks manage better

The asset quality of public sector banks have taken a hit despite huge provisioning by banks and massive debt restructuring by corporates

The asset quality of public sector banks have taken a hit despite huge provisioning by banks and massive debt restructuring by corporates. Non-performing assets (NPAs) of PSU banks had risen by Rs 42,500 crore in the fiscal 2011-12 indicating stress in the economy inflicted by high inflation,interest rates and demand slowdown.

Bad loans of PSU banks are at Rs 117,260 crore against Rs 74,662 crore in the previous year,a rise of 57 per cent. The rise would have been even steeper had the banks not entertained debt restructuring proposals of several big borrowers and not made provisions against bad assets. Provisioning by PSU banks amounted to Rs 58,000 crore against Rs 38,000 crore in the previous year.

The rise in NPAs has happened despite huge provisioning by banks. There has been a big rise in debt recast requests from corporates, said DR Dogra,MD of Care Ratings.

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State Banks gross NPAs shot up from Rs 25,326 crore to Rs 39,676 crore during the fiscal. However,it managed to arrest the rise in the fourth quarter. Punjab National Banks NPAs soared from Rs 4,379 crore to Rs 8,719 crore,Bank of India from Rs 1,944 crore to Rs 3,656 crore and OBC from Rs 1920 crore to Rs 3,580 crore.

The major sectors which have witnessed slippages include aviation,textiles,iron and steel and infrastructure. These sectors and agriculture account for over half of the NPAs. The rise in NPA numbers is also attributable to the systemic recognition of NPAs by PSU banks, said a senior banking sector official.

On the other hand,private banks led by ICICI Bank,HDFC Bank and Axis Bank have managed to rein in their bad loans at around Rs 17,783 crore against Rs 17,542 crore in the last year.

Worried over the sharp rise in NPAs,the Reserve Bank of India has asked banks to put in place a robust mechanism for early detection of distress and measures,including prompt restructuring in the case of all viable accounts wherever required,with a view to preserve the economic value of such accounts.

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It has also asked banks to maintain a proper system,generated segment-wise data on their NPA accounts,write-offs,compromise settlements,recovery and restructured accounts.

The RBI is also worried that big borrowers are getting the benefits of debt restructuring like lower interest rate,moratorium on repayment and fresh loan.