Undeclared non-performing assets (NPAs) in the books of various lenders in the country may amount to Rs.3 lakh crore as of March 2018. These undeclared NPAs arise from borrowers who have defaulted with one lender and failed to disclose their financial position to other banks while taking a loan. This analysis about NPAs was disclosed by TransUnion Cibil.
According to this analysis, these undeclared NPAs are currently piled up in various public sector lenders that are not facing the prompt corrective action (PCA) from the Reserve Bank and other private lenders in the country. This information has been shared with the RBI by TU Cibil. Banks are all set to declare another round of provisions for bad loans for the quarter ending September 2018.
Bad loans continue to remain a major problem for all public sector banks in the country. As per the cross-default clause in RBI guidelines, lenders are required to take NPA proceedings against a borrower even if the default is made in a loan taken with another bank.
According to Mr. Satish Pillai, MD and CEO of TransUnion Cibil, the information declared by TU Cibil is based on facts rather than opinion. The company gets information on every transaction and this enables it to get a ‘one bank’ view on various loans. He also noted that the increase in good loans in the industry can be regarded as a positive sign.
According to the ‘Iceberg Study’, the total amount of NPAs recognised in public sector banks stands at Rs.10.4 lakh crore as of March 2018. This is an increase of nearly Rs.2.4 lakh crore from the previous year. The total commercial credit offered till the period of March 2018 stands at Rs.54.2 lakh crore.
According to Mr. Pillai, undeclared NPAs are among the lowest in public sectors banks that are already in PCA. The lending restrictions imposed under the PCA prevent banks from providing high-risk loans to various borrowers. He also noted that lending restrictions shall be removed for providing loans to small-scale companies since these NPAs are mostly concentrated in large corporates.
Source: Economic Times