Bank non-performing assets witness significant growth in the first half of 2017

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A recent survey result has indicated that Indian banks have seen a considerable rise in non-performing assets between January and June, this year. The FICCI-IBA survey showed that the NPAs in public sector banks rose significantly, with 91% of such banks reporting a growth.

The survey was taken by 64% of the banking industry, with participation from 20 private, public, and foreign banks.

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According to a recent survey conducted by FICCI-IBA, bank non-performing assets and bad loans have risen significantly in the first half of 2017-18.

50% foreign banks and 71% private banks also reported that their bad loans have grown during this period. Additionally, high level of non-performing assets were recorded by the metal, textile, and infrastructure industries, according to 50% of the respondents.

Participating banks are expecting the automobile, pharmaceutical, and infrastructure sectors to drive credit growth from July to December this year.

Lenders opine that the amendments made to the Banking Regulation Act and the Insolvency and Bankruptcy Code will assist in the resolution of the stressed assets. The banks have made a suggestion to strengthen the legal infrastructure and ease provisioning norms for stressed assets to leverage the disposal of bad loans.

FICCI mentioned in a statement that the survey was performed at a time when NPAs have been worrying the banks, particularly lenders in the public sector.

The survey results further indicated the following:

  • About 35% of respondents said that credit standards for large companies have been tightened in the Jan-Jun period. 40% expect that it will be further tightened during the rest of the year.
  • The infrastructure sector continues to record the largest increase in long-term loans.
  • Majority of the participating banks were in favour of the suggestion of RBI setting up Wholesale and Long Term Finance Banks that offer specialised services.
  • During the first half of the year, 75% of the respondent banks reduced their Marginal Cost of Fund Based Lending Rate (MCLR). 45% of lenders reduced it by more than 50 bps.
  • The survey participants were also asked about the merger of public sector banks post SBI consolidation. Some of the respondents backed the merger, while others suggested that avenues for privatisation should be found.

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