NPAs ratio in public sector banks up 9% in FY16

Bad loans in the public sector and scheduled commercial banks of India have risen in FY16 on the back of sluggish domestic growth, slowdown in recovery of the global economy and fall in exports.

The Gross Non-Performing Assets Ratio (GNPA ratio) of  public sector banks (PSBs) surged by 9.32% to Rs 4,76,816 crore in the fiscal year 2015-16 (FY16), the Ministry of Finance said in a statement on Tuesday. The GNPA ratio of PSBs was 5.43% to Rs  2,67,065 crore in FY15.

Similarly, the GNPA ratio of scheduled commercial banks (SCBs) in FY16 grew by 7.43% to Rs 5,41,763 crore. The ratio was 4.62% to Rs 3,09,408 crore in FY15.

“Main reasons for increase in non-performing assets (NPAs) of banks are sluggishness in the domestic growth during the recent past, slowdown in recovery in the global economy and continuing uncertainty in the global markets leading to lower exports of various products like textiles, engineering goods, among others...,” the statement said citing Minister of State for Finance Santosh Kumar Gangwar as stating in reply to a Rajya Sabha question on Tuesday. 

Gangwar further said, “...external factors including the ban in mining projects, delay in clearances affecting power, iron and steel sector, volatility in prices of raw material and the shortage in availability of power have impacted the operations in the textiles, iron and steel, infrastructure sectors...” 

The government has taken specific measures to address issues in sectors such as infrastructure (power, roads, etc.), steel and textiles, where incidence of NPAs are high, Gangwar said.  

The government has also approved establishment of six new Debt Recovery Tribunals (DRTs), to speed up the recovery of bad loans of the banking sector, in addition to existing thirty three, he noted.  

Meanwhile, in a separate statement on Tuesday, the Ministry of Finance has said the government has approved the proposal of merger of five associate banks of State Bank of India (SBI) and Bhartiya Mahila Bank (BMB) with itself.

“The Cabinet in its meeting dated June 15, 2016, has approved the proposal of acquisition of assets and liabilities of subsidiary banks that is State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala, State Bank of Travancore and Bhartiya Mahila Bank (BMB),” Gangwar said in a statement. 

The benefits for attempting the merger of five subsidiary banks and BMB with SBI include rationalisation of resources, reduction of costs, better profitability, lower cost of funds leading to better rate of interests for public at large, improved productivity and customer services, he added.