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Gujarat: Bank NPAs rise by 70% in 3 years

Bad loans for Oct to Dec 2018 stands at Rs 38,520 cr; rise of 9.37% in 3 quarters of 2018-19

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Bad loans of banks in Gujarat grew about 70 per cent in three years, a report of the State Level Bankers Committee (SLBC) for the October to December quarter of the fiscal 2018-19 says.

Gross Non Performing Assets (NPAs) of banks stood at Rs 38,520 crore, 11.45 per cent higher than Rs 34,563 crore in the corresponding quarter in the previous fiscal and 70 per cent higher than Rs 22,659 crore in the corresponding quarter of 2015-16. Market players say this indicates that the ability of bank clients to repay loans has dropped sharply over the years.

While the NPA has dropped marginally over previous quarter's gross NPA of Rs 39,289 crore or 6.88 per cent of total advances, overall it has risen by 9.37 per cent during the fiscal. Sagar Rabari, founder president of Gujarat Khedut Ekta Samiti said that the constant rise in NPA indicates an overall slowdown in the economy and earnings of farmers and industrialists, depleting their ability to repay loans. "First, demonetisation and then Goods and Service Tax (GST) has adversely hit earnings of the masses. This has reduced their purchasing power consequently reducing production and thereby creating joblessness," said Rabari.

Prabodh Patel, president of Federation of Industries Association – Gujarat (FIA) said that as such slowdown is not evident in Gujarat as more and more industries are coming up in Dahej, Vapi and other industrial estates. However, overproduction because of intense competition may have hurt earnings and therefore the ability to repay loans, he said.

He admits that strict environment regulations have restricted production of chemical units in Gujarat. KT Patel, former president of FIA and former vice president of Gujarat Chamber of Commerce and Industry (GCCI) said that actual reasons for a rise in NPA need to be found out. "Only industries should not be blamed for bad loans. One should also see what action has been taken against bankers who had approved these loans, whether banks have been able to recover high value loans," said Patel.

Bankers in the know of things said it is because of rising NPAs that the Reserve Bank of India (RBI) had initiated Prompt Corrective Action (PCA) against certain banks. "Banks are able to recover loans as well. However, forcing banks to bail out companies such as Jet Airways will nullify all the good work done so far," said a banker working in a Public Sector Bank. Sources in the banking sector said that the government might do some kind of window-dressing to project a rosy picture ahead of elections.

Economist Hemantkumar Shah said that the rising NPAs indicate a slowdown in Gujarat's economy, depleting the ability of clients to repay loans. "These are aftershocks of two earthquakes, demonetisation and GST. Small businesses have been the worst hit," said Shah.

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