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Reserve Bank of India Deputy Governor S S Mundra (pictured) says the reflection in banks’ recent quarterly results of their high non-performing asset (NPA) numbers is because of the delayed recognition of stress by the lenders.
He said they’d consider whether the steeper stress numbers should invite more restriction on lending or not.
“The results reflect at what point of time a bank started on (this) journey. Those who started early are different from those who’ve started now. The (RBI-decreed) road map remains intact,” Mundra said at a Confederation of India Industry meeting on banking.
Gross NPAs plus written-off assets and restructured assets were 14.1 per cent of total bank loans as on September 2015, against 13.6 per cent in March 2015, said Mundra. For public sector banks, the total stress (GNPAs plus written-off assets plus restructured assets) was 17 per cent of total loans as on Sept ‘15. For private banks, the number was 6.7 per cent.
Medium industries showed the highest stress, with 31.5 per cent of its loans being stressed; 23.7 per cent of loans to large industries were stressed, he added.
However, a large part of the write-off is also technical, more of balance sheet management.
With many banks’ GNPA levels close to 10 per cent of total loans, RBI’s prompt corrective action plan (PCA) can technically kick in, which could restrict their lending. On this, he said: “The PCA is a comprehensive framework. Banks are in the process. Once the industry cycle is completed, we will have a relook and assess what has to be done.”
“Prevention is better than cure. Be assured that the present ailment is well ·within cure and the treatment is being administered. While the medicine is important, the willpower of the patient has its own importance...We all should be optimistic about sustained recovery and continuous wellbeing hereafter.”
Ponzi borrowers who wanted to create something and sell later at a higher value are now stuck and have to resort to distress sales, he indicated.
“That is where the game has gone wrong. Some people started a project, not with a long term commitment but with only an intention to sell it later. Unfortunately, the game has gone sour because of a host of reasons and what was started with the intention of being a value sell is happening as a distress sale in many cases. If you’ve chosen that model, it will be an important aspect to reflect,” Mundra said.
He said they’d consider whether the steeper stress numbers should invite more restriction on lending or not.
“The results reflect at what point of time a bank started on (this) journey. Those who started early are different from those who’ve started now. The (RBI-decreed) road map remains intact,” Mundra said at a Confederation of India Industry meeting on banking.
Gross NPAs plus written-off assets and restructured assets were 14.1 per cent of total bank loans as on September 2015, against 13.6 per cent in March 2015, said Mundra. For public sector banks, the total stress (GNPAs plus written-off assets plus restructured assets) was 17 per cent of total loans as on Sept ‘15. For private banks, the number was 6.7 per cent.
Medium industries showed the highest stress, with 31.5 per cent of its loans being stressed; 23.7 per cent of loans to large industries were stressed, he added.
However, a large part of the write-off is also technical, more of balance sheet management.
With many banks’ GNPA levels close to 10 per cent of total loans, RBI’s prompt corrective action plan (PCA) can technically kick in, which could restrict their lending. On this, he said: “The PCA is a comprehensive framework. Banks are in the process. Once the industry cycle is completed, we will have a relook and assess what has to be done.”
“Prevention is better than cure. Be assured that the present ailment is well ·within cure and the treatment is being administered. While the medicine is important, the willpower of the patient has its own importance...We all should be optimistic about sustained recovery and continuous wellbeing hereafter.”
Ponzi borrowers who wanted to create something and sell later at a higher value are now stuck and have to resort to distress sales, he indicated.
“That is where the game has gone wrong. Some people started a project, not with a long term commitment but with only an intention to sell it later. Unfortunately, the game has gone sour because of a host of reasons and what was started with the intention of being a value sell is happening as a distress sale in many cases. If you’ve chosen that model, it will be an important aspect to reflect,” Mundra said.