Industry players say that if the share of recovery of loans is significant, then it is a welcome change in the economy
In what could be a major turnaround, bad loans in Gujarat have dropped by Rs4,023 crore in three months. This is a mix of recovery of loans, writing of loans and transferring them to Asset Reconstruction Companies (ARCs), according to bankers.
Industry players say that if the share of recovery of loans is significant, then it is a welcome change in the economy.
According the State-Level Bankers Committee (SLBC) report for the July-September quarter of the fiscal 2017-18, gross Non-Performing Assets (NPA), or bad loans, in Gujarat stand at Rs 31,318.7 crore, a reduction of Rs 4,022.92 crore over NPA of Rs 35,341.62 crore in April-June quarter. Total bank advances in the state stand at Rs 4,89,833 crore, compared to Rs 4,77,480 crore. While advances rose by about 2.6 per cent in three months, NPAs dipped by 12.5 per cent. Bad loans now constitute 6.39 per cent of the total advances in the state, compared to 7.4 per cent in the previous quarter.
Vikramaditya Singh Khichi, Field General Manager of Dena Bank, told media persons that this is a net result of recovery of loans as well as loan write-offs as well as transferring loans to ARCs. Dena Bank is a leading bank in Gujarat.
It is unprecedented in the recent history of Gujarat that bad loans dropped by such a big margin.
Between April-June and July-September quarters of the fiscal 2016-17, bad loans dropped marginally by Rs 457.54 crore from Rs 29,734.12 crore to Rs 29,276.58 crore. Overall, the trend has been on the upswing, with NPA rising dangerously by 74 per cet in the previous eight quarters and by 19 per cent in a year.
If bad loans have been genuinely recovered, that is a major improvement in the economy. The development reflects the health of Gujarat's economic landscape. However, NPAs also fall if they are transferred to ARC or other similar mechanisms being under taken," said Jaimin Vasa, vice-president of the Gujarat Chamber of Commerce and Industry.
Bankers say that national banking regulator the Reserve Bank of India (RBI) has put many banks on its watch list for their asset quality. "The move has resulted in many banks suspending their expansion operations as well as other operations and focused on recovery of loans. This has resulted in improvement in the recovery of loans," said an official of a Public Sector Bank in Gujarat.
Despite the fall in bad loans, the present level represents a danger signal as the percentage NPA is still above 5 per cent, which is a threshold of danger. For at least nine consecutive quarters now the NPA is over 5 per cent mark.
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