Data

Data | The NPA situation: present perfect, but future tense

A security guard’s reflection is seen next to the logo of RBI logo at the RBI headquarters in Mumbai. File

A security guard’s reflection is seen next to the logo of RBI logo at the RBI headquarters in Mumbai. File   | Photo Credit: Reuters

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The NPA ratio for all commercial banks declined in FY19, but stressed assets inched up. Moreover, the NPA ratio of Indian banks is the poorest among emerging economies.

The Non-Performing Assets (loans overdue for >90 days) ratio for all commercial banks declined in FY19 after rising for seven consecutive years. However, in the first half of FY20, stressed assets (potential NPAs) inched up. Moreover, the NPA ratio of Indian banks is the poorest among emerging economies.

The share of Gross Non-Performing Assets (GNPAs) among total loans declined to 9.1% in FY19 after having risen for seven consecutive years. The slippage ratio (indicating fresh accretion of NPAs in a year) also declined.

The banks recovered ₹70,819 cr. worth stressed assets in FY19 under the Insolvency and Bankruptcy Code, compared to ₹4,926 cr. in FY18. This played a part in the GNPA’s decline. The GNPA of private banks increased due to classification of IDBI bank (NPA ratio: 29.43) as a private bank.

Graph depicts GNPA Ratio

Bad loans down

image/svg+xml Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 16 12 8 4 0 banks Private sector banks Foreign banks All Scheduled Commercial Banks Public sector
 

While GNPAs are down, stress in large borrowal accounts (exposure of >₹5 cr.) rose in the first half of FY20. Special Mention Accounts-1 (loans overdue between 30 and 60 days) & Special Mention Accounts-2 (loans overdue between 60 and 90 days) rose in H1FY20. Simply put, SMA accounts are red flags which, if not addressed, can become NPAs in the next cycle

Stressed assets up

image/svg+xml For instance, SMA-2 accounts grew from 0.7% to 2.2% in PSBs in H1FY20 2.8 1.3 1.6 1.0 0.7 2.2 1.5 1.8 1.9 0.3 0.5 1.2 3 2.5 2 1.5 1 0.5 0 SMA-1 PSBs PVBs SMA-1 SMA-2 SMA-2 FY18 FY19 H1FY20
 

India’s Non-Performing loans ratio (%) is the worst among emerging economies. Table lists the ratio between 2011 and 2019. In recent years, the ratio improved for Brazil while it deteriorated in Russia, South Africa and Turkey. India’s NPA ratio saw a surge in 2016 after the RBI carried out an expansive Asset Quality Review in the year before. The review resulted in identification of many large loan accounts which had gone bad resulting in a huge jump in NPAs in India

Worst among emerging economies

image/svg+xml 2011 ‘12 ‘13 ‘14 ‘15 ‘16 ‘17 ‘18 ‘19:Q1 ‘19:Q2 Brazil 3.5 3.4 2.9 2.9 3.3 3.9 3.6 3.1 3.1 3.1 China 1 1 1 1.2 1.7 1.7 1.7 1.8 1.8 1.8 India 2.7 3.4 4 4.3 5.9 9.2 10 9.5 8.9 9.2 Indonesia 2.1 1.8 1.7 2.1 2.4 2.9 2.6 2.3 2.4 2.4 Malaysia 2.7 2 1.8 1.6 1.6 1.6 1.5 1.5 1.5 1.6 Mexico 2.1 2.4 3.2 3 2.5 2.1 2.1 2.1 2 2.1 Philippines 2.6 2.2 2.4 2 1.9 1.7 1.6 1.7 2 2 Russia 6.6 6 6 6.7 8.3 9.4 10 10.1 - - South Africa 4.7 4 3.6 3.2 3.1 2.9 2.8 3.7 3.8 3.7 Turkey 2.6 2.7 2.6 2.7 3 3.1 2.8 3.7 3.8 4.1 2011 ‘12 ‘13 ‘14 ‘15 ‘16 ‘17 ‘18 ‘19:Q1 ‘19:Q2
 

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Printable version | Jan 21, 2020 5:33:45 AM | https://www.thehindu.com/data/data-the-npa-situation-present-perfect-but-future-tense/article30402933.ece

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