India Spend, in February reported that bad-loans rose by 20% from April to December 2014 in public sector banks that account for over 70% of India's commercial lending.
Bad loans of Indian banks are seen rising to their highest levels in nearly 14 years, India Ratings has warned.
The ratings agency further said that it estimates total impaired loans at 13% (of overall loan book) for FY16. 4.9% of this would be gross non-performing loans and the rest would be restructured loans, etc.
Three out of the five big banks in India have reported a hike in non-performing assets for last fiscal. Crisil, too, has highlighted the bad loans problem and pointed out that the total amount of assets gone bad and restructured to hit Rs 5.3 lakh crore this year. NPAs are likely to be at Rs 4 lakh crore, up by Rs 60,000 crore from last year.
In January this year, shares of ICICI Bank and Bank of Baroda plunged as their bad-loans provisions saw a jump.
Bank of Baroda's provisions grew by 66% for the last quarter of the year and ICICI Bank increased its cushioning by 41%.
As recent as in April this year, shares of ICICI Bank tumbled further as the bank posted low profit as its gross non-performing assets grew to 3.78% from 3.03% as against the same period a year before.
Moreoever, India Spend, in February reported that bad-loans rose by 20% from April to December 2014 in public sector banks that account for over 70% of India's commercial lending.
Gross NPAs, it reported, rose to Rs 2.73 lakh crore and if combined with restructured assets, the number stood at nearly Rs 5.5 lakh crore.
RBI data shows that as on March 31, 2015, gross NPAs stood at 4.45%. That is, for every Rs 100 given as a loan, Rs 4.45 is lost in bad assets.
However, none of this is shaking Reserve Bank of India's (RBI) chief Raghuram Rajan's belief. He maintained that these bad assets won't lead to a financial crisis. He acknowledged that improvements in credit quality is going to be slow but ruled out the issue ballooning into a crisis.
The RBI governor, on May 15, categorically denied that India isn't in danger of a financial crisis.
NPAs, as India Ratings, suggest, are on the rise and may hit a 14-year peak if corrective action isn't taken.
With the slow economic recovery, this seems a tall order.
PTI has reported, "The stressed assets ratio, which includes NPAs and restructured loans, of public sector banks has risen by an alarming 131 bps to 13.2% or over Rs 7,12,000 crore, in FY15 with their gross non-performing assets touching 5.17%. This is nearly 230 bps more than that of the system, according to the RBI data."
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