 "Capital ratio dips, profit falls, bad loans rise in FY13")
The capital adequacy ratio of banks in India declined, at an aggregate level, at the end of March 2013 compared to a year earlier, the Reserve Bank of India (RBI) said on Monday. This, along with lower profitability in terms of return on assets, higher non-performing assets and an increase in the cost of funds, reflected the stress on domestic banks.
Industry analysts expressed concerns over the dip in capital adequacy ratio as Indian banks would require an estimated Rs 500,000 crore to meet the Basel-III capital norms.
The capital adequacy ratio of all scheduled commercial banks in India narrowed to 13.88 per cent at the end of 2012-13 from 14.24 per cent a year earlier.
While the capital adequacy ratio of private banks improved by 63 basis points (bps) to 16.84 per cent, it fell sharply, by 85 bps for public sector banks. State Bank of India (SBI), the country’s largest lender, saw its capital adequacy ratio shrink to 12.92 per cent at the end of March 2013 from 13.86 per cent a year earlier.
Analysts feel there is further risk of capital erosion for government-owned banks if non-performing assets continue to expand. Some analysts estimate that banks will need at least Rs 1.75 lakh crore to prevent capital erosion due to loan impairment.
“Net non-performing asset (NPA) ratio of all scheduled commercial banks at the aggregate level increased at end-March 2013 compared to the previous year,” RBI noted. The net bad loan ratio of all scheduled commercial banks deteriorated by 40 bps to 1.68 per cent at the end of the last financial year.
All banks — public, private and foreign — witnessed an increase in their non-performing assets.
While the net NPA ratio increased by 49 bps for public sector banks, private and foreign banks saw it rise by six and 40 bps, respectively.
Top state-run lenders, including SBI, Bank of Baroda and Punjab National Bank, saw their net NPA ratios increase by 28-97 bps.
“Business per employee as well as profit per employee of all scheduled commercial banks increased during 2012-13 vis-à-vis that in 2011-12.Industry analysts expressed concerns over the dip in capital adequacy ratio as Indian banks would require an estimated Rs 500,000 crore to meet the Basel-III capital norms.
The capital adequacy ratio of all scheduled commercial banks in India narrowed to 13.88 per cent at the end of 2012-13 from 14.24 per cent a year earlier.
While the capital adequacy ratio of private banks improved by 63 basis points (bps) to 16.84 per cent, it fell sharply, by 85 bps for public sector banks. State Bank of India (SBI), the country’s largest lender, saw its capital adequacy ratio shrink to 12.92 per cent at the end of March 2013 from 13.86 per cent a year earlier.
Analysts feel there is further risk of capital erosion for government-owned banks if non-performing assets continue to expand. Some analysts estimate that banks will need at least Rs 1.75 lakh crore to prevent capital erosion due to loan impairment.
“Net non-performing asset (NPA) ratio of all scheduled commercial banks at the aggregate level increased at end-March 2013 compared to the previous year,” RBI noted. The net bad loan ratio of all scheduled commercial banks deteriorated by 40 bps to 1.68 per cent at the end of the last financial year.
All banks — public, private and foreign — witnessed an increase in their non-performing assets.
While the net NPA ratio increased by 49 bps for public sector banks, private and foreign banks saw it rise by six and 40 bps, respectively.
Top state-run lenders, including SBI, Bank of Baroda and Punjab National Bank, saw their net NPA ratios increase by 28-97 bps.
Profitability in terms of return on assets of all scheduled commercial banks at the aggregate level declined during 2012-13,” said RBI.
Banks’ return on assets was 1.03 per cent at the end of March 2013, compared to 1.08 per cent a year ago.