Gross NPAs of banks increase to 11.2% at Rs 10.39 trn in FY18: RBI report

System-wide gross non-performing assets of banks rose to 11.2 percent or at Rs 10.39 trillion in FY18 from 9.3 percent a year ago, and the share of public sector banks stood at Rs 8.95 trillion, or at 14.6 percent, according to the Reserve Bank data released Friday.

In FY17, system-wide gross NPAs stood at 9.3 percent and that of state-run lenders stood at 11.7 per cent.

"During FY18, the GNPA ratio reached 14.6 percent for state-run banks due to restructured advances slipping into NPAs and better NPA recognition," RBI said in its report on 'Trends & Progress of Banking in 2017-18'.

In terms of the net NPA ratio, state-run banks saw significant deterioration at 8 percent in FY18 from 6.9 percent year-ago.

Private sector peers banks' GNPA ratio stood at a much lower level of 4.7 percent as against 4.1 percent in FY17.

"Resolute efforts on the part of private sector banks to clean up their balance sheets through higher write-offs and better recoveries also contributed to their lower GNPA ratios," the report said.

Asset quality of foreign banks improved marginally to 3.8 percent in FY18 from 4 percent in FY17.

In FY18, the share of doubtful advances in total gross NPAs increased sizeably to Rs 5.11 trillion or 6.7 per cent of the system, driven up by state-run banks whose ratio stood at 9 percent.

In fiscal 2018, share of sub-standard and loss assets in GNPAs of private banks declined to 1.1 percent and 0.2 percent, respectively due to aggressive write-offs.

During the year under review, the fresh slippages rose for state-run lenders on account of restructured advances slipping into NPAs and a decline in standard advances.

In the previous fiscal, the GNPA ratio of public sector banks arising from larger borrower accounts (exposure of Rs 5 crore and above) increased to 23.1 per cent from 18.1 per cent in the FY17.

But this saw an improvement in FY18. "During the first half of FY18, NPAs in large borrower accounts of state-run banks and private sector banks declined to 21.6 percent and 7 percent, respectively," the report said.

The gems & jewellery sector saw a significant increase in GNPAs during FY18 with unearthing of frauds at PNB, which bore the brunt of the Rs 140 billion scam by Nirva Modi and his uncle Mehul Choksi.

"Frauds have emerged as the most serious concern in the management of operational risks, with 90 percent of them located in the credit portfolio of banks," the report said.

A large value frauds involving Rs 500 million and above constituted about 80 percent of all the frauds during 2017-18. Nearly 93 percent of the frauds worth Rs 1 million or more occurred in state-run lenders while private banks accounted for just 6 percent.

"We will continue to monitor asset quality as well as resolution of stressed assets with a focus on implementation of the new resolution framework," the RBI said in the report.

The monetary authority also said it will look into implementation of Ind-As, corporate governance in banks and a revised framework for securitisation.

The central bank also intends to issue revised prudential regulations including guidelines on exposure/investment norms, risk management framework and select elements of Basel III capital framework, it said.