Statsguru: Twin balance sheet problem

The investment scenario in the country continues to be grim. The latest data shows gross fixed capital formation, which connotes investment, declined from 31 per cent in Q1FY17 to 28.9 per cent in Q2FY18.

What is even more worrying is that, according to the RBI’s Financial Stability Report, new investment proposals have declined significantly in Q2FY18. The silver lining is, as shown in Chart 1, the number of stalled projects has also declined . 

Gross non-performing advances (GNPA) of scheduled commercial banks (SCBs) increased from 9.6 per cent to 10.2 per cent between March and September 2017, as shown in Chart 2. For public sector banks, it was even higher at 13.5 per cent at the end of Q2FY18, with net NPAs at a staggering 7.9 per cent. 

The asset quality of banks deteriorated across broad sectors, especially in industry, between March and September. As shown in Chart 3, sectors such as industries, mining and quarrying, food processing, engineering, construction, and infrastructure all registered an increase in their stressed advances ratios.

The share of large borrowers in both bank loans and GNPAs also declined between March and September (Chart 4). But, while the stressed advances of large borrowers increased by 2.4 per cent between this period, advances to large borrowers classified as special mention accounts-2 (SMA-2) increased sharply by 56.5 per cent (Chart 5).

According to the report, the 470 cases admitted by the National Company Law Tribunal (NCLT) were at various stages of insolvency process. But, resolution plans or liquidation orders were approved only in 25 cases so far (Chart 6).

 

StatsGuru is a weekly feature. Every Monday, Business Standard guides you through the numbers you need to know to make sense of the headlines

Source: Financial Stability Report, Reserve Bank of India December 2017 ; Compiled by BS Research Bureau