PSBs 30-day plus overdue account plunges to Rs 0.87 lakh crore, banking sector PCR rises to 67.17% end September 2018
Over the last four and half years, the Government has pursued a comprehensive approach for addressing non-performing assets (NPA) issues. Forbearance has been ended and stressed assets classified as NPAs under the Asset Quality Review (AQR) in 2015 and subsequent recognition by banks. Further, restructuring schemes that permitted such forbearance have been discontinued in February 2018. As a result, as per RBI data, Standard Restructured Assets (SRAs) of Scheduled Commercial Banks (SCBs) have declined from the peak of 6.5% in March 2015 to 0.49% in September 2018.The banks have been resolving and recovering value from stressed accounts through clean and effective laws and processes introduced by the government. NPAs of PSBs reduced by Rs 2,61,359 crore over the last four and a half financial years. Further, PSBs reported record recovery of Rs 60,713 crore in the first half of FY 2018-19 (H1 FY 2018-19), which is more than double the recovery made in the first half of FY2017-18, and gross NPAs have begun declining with a reduction of Rs 26,798 crore in H1 FY 2018-19.
The 30-day plus overdue account (Special Mention Accounts (SMA) 1 and 2) have also reduced steadily to around 39% over five quarters (from Rs 2.25 lakh crore in June 2017 to Rs 0.87 lakh crore in September 2018 for PSBs), indicating significant and sustained reduction in risk of fresh NPAs.
Thus, improvement in asset quality is evident with GNPAs having peaked recognition nearly over, and the amount in SMA 1 and 2 reducing by 61% over five quarters. Further, with substantial provisioning, the provisional coverage ratio (PCR) o SCBs has risen steadily to 67.17% as of September 2018, from the pre-AQR level of 49.3% in March 2015, cushioning bank balance-sheets to absorb the impact of NPAs.
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