You can look at this story from two angles: Either the banks in Gujarat have tightened their loan recovery systems or that the borrowers have started earning enough to repay their interest-heavy loans. Be that as it may, the good news is that in the last six months, gross non-performing assets (NPA) have decreased marginally from 5.37% in March 2013 to 4.74% in September 2013.
However, when compared to the national average, it still reflects a sad picture with the gross NPA ratio in Gujarat still higher than elsewhere.
By the end of March 2013, the total advances in the state were Rs2.78 lakh crore and at that time, the total NPA amount was Rs14,946 crore. In six months, total lending by banks in Gujarat increased by 7.41% or Rs20,616 crore to Rs2.98 lakh crore, reveals the State-Level Bankers’ Committee (SLBC) quarterly report of September 2013, released on Monday. An official from a private bank said stricter recoveries have helped the banks succeed in reducing the NPA amount.
“Sometimes we have to take strict action to take our money back,” he said, requesting anonymity.
Incidentally, within six months, the total NPA amount in the state decreased by Rs785 crore to Rs14,161 crore by the end of September 2013. The gross NPA amount is 4.74% of total outstanding amount of Rs2.98 lakh crore. Compared to the national average of gross NPA at 3.98%, the gross NPA ratio in Gujarat is higher.
The report shows that in Gujarat, the gross NPA has come down in six months, particularly in the non-priority sectors. But the NPA amount has gone up drastically in SMEs, while there is also rise in the NPA amount in housing and education loans.
Till the end of March 2013, the total NPA amount in SMEs in Gujarat was Rs1,068 crore which increased by almost 60% in six months to Rs1,627 crore. The total outstanding amount in SMEs was Rs36,786 crore which increased by 24% to Rs45,669 crore in six months. In case of housing loan, the NPA amount was Rs79.26 crore which increased to Rs122.64 crore. The total lending in housing loan increased by Rs5,448 crore in six months, while the NPA amount in education loan increased from Rs32.71 crore to Rs47.59 crore during the same period.
Banks are worried over the rising NPAs, said Ashwani Kumar, CMD of Dena Bank, which is the convener of SLBC. “We have also requested the state government to help us in the recoveries.
With the help of district collectors, we can recover lot of money. The bank will continue to be cautious in certain sectors such as steel, textile and infrastructure,” he said.
A slack economy is the biggest reason of rise in NPA amount in the SME sector, said general manager of Bank of Baroda, Umakant Bijapur. “In few cases companies have made sales but they have not got their money. In other cases inventory is piling up and several other issues has led to this situation. But SME being a very robust sector, it rise quickly even after a fall,” he said.
In case of education and housing loan, the NPA scene is much better off compared to other states, said general manager of Union Bank of India, TR Sahni. “After completing their education, students often do not get good paying jobs. Secondly, parents who guarantee the loan, start repaying the money. Hence, compared to other states, the NPA ratio in education loan is much less in Gujarat compared to the national average,” he said, adding that even in the housing sector, the NPA ratio is less compared to other states.