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Reflecting the economic slowdown, banks, especially public sector lenders, saw a substantial rise in non-performing assets (NPAs) in the financial year's second quarter.
The pressure would continue but the pace of slippage is expected to moderate in the coming quarters, feel bankers and analysts.
State Bank of India saw the highest growth in NPAs, at Rs 3,314 crore, followed by Rs 2,284 crore for United Bank of India. Punjab National Bank (PNB)'s NPAs rose by Rs 1,436 crore.
Yet, some banks stood out in being able to control the slippage. Bangalore-based Canara Bank, for instance. R K Dubey, chairman and managing director, said the focus had been on credit monitoring and recoveries. Mumbai-based Bank of India's asset quality showed improvement. Its gross NPAs declined to 2.93 per cent of the total from 3.42 per cent a year before. The recovery from the written-off accounts was Rs 346 crore, as against Rs 167 crore in the second quarter of FY13.
Vibha Batra, senior vice-president, Icra, said the sector as a whole had seen a sharp rise in stressed assets (NPAs and restructured loans) in recent quarters, due to the slowdown and a weak operating environment. She expected the pace of increase in bad loans to moderate. However, there would also be a hardening of existing non-performing loans (NPLs), forcing banks to make higher provisions, she said.
Banks provide 15 per cent for loans that become substandard and have to provide 50 per cent for loans that slip into the doubtful category.
According to India Ratings and Research, the situation has deteriorated rapidly for weaker banks. Quarterly losses in Central Bank of India and United Bank of India during the quarter were equivalent to about a tenth of their equity. Central Bank posted a net loss of a little over Rs 1,500 crore, as it had to make high provisions for bad loans.
