Will commercial banks too feel the strain of rising NPAs?

While all attention is on the gross non-performing assets (NPAs) of Public Sector Banks (PSBs), the gross NPAs of scheduled commercial banks has been growing.

Scheduled commercial backs reported a gross NPAs of Rs 11.02 lakh crore. A 7.45% rise in the GNPA ratio in FY2016 from 4.62% in FY2015.

Gross NPAs of scheduled commercial banks increased significantly in FY2016 to Rs 5.42 lakh crore from Rs 3.09 lakh crore in the previous year.

However, gross NPAs of PSBs amount to Rs 9.60 lakh crore in the last three financial year FY2016, FY2015 and FY2014. The gross NPAsrose to Rs 4.77 lakh crore in FY 2016 from Rs 2.67 lakh crore in FY 2015.

Among PSBs the GNPA ratio was at 9.32% in FY2016 from 5.43% in FY2015, and 4.72% in FY2014.

“The government has taken specific measures to address issues in sectors such as Infrastructure (Power, Roads etc.), Steel and Textiles, where incidence of NPAs is high, said Santosh Kumar Gangwar, Minister of State (MoS) for Finance in a response to a question in the Lok Sabha.

Other measures to improve the rising NPAs the 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.

Reserve Bank of India (RBI) has also undertaken steps which include formation of Joint Lenders’ Forum (JLF) for revitalising stressed assets in the system, flexible structuring for long term project loans to infrastructure and core industries, and strategic debt restructuring (SDR) scheme and scheme for sustainable structuring of stressed Assets (S4A).

The Government has recently issued advisory to banks to take action against guarantors in event of default by borrower under relevant sections of SARFAESI Act, Indian Contract Act and RDDB&FI Act, since in the event of default; the liability of the guarantor is co-extensive with the borrower.