Demonetisation worsens banks’ bad loan crisis; 56.4 % rise in NPAs

New Delhi, February 20: The gross non-performing assets of state owned banks surged 56.4 per cent to Rs 614,872 crore during the 12-month period ending December 2016.

The dismal state of rising NPAs seems to worsen further in the next two quarters as many small and medium units are struggling to repay their loans after being hit hard by the government’s demonetisation decision.

In the last two years, as much as 135 per cent rise in NPAs is recorded despite a host of restructuring schemes announced by RBI.

According to data released by Care Ratings (reported by The Indian Express), 11 per cent of the gross advances of PSU banks are equivalent to NPAs. The total bad loans for public and private banks were whopping Rs 697,409 crore till December 2016.

Commenting on the hard situation of banks, a former chairman of a nationalised bank says, “The government needs to chalk out a plan for such banks. Obviously, schemes to tackle stressed assets haven’t worked well. Many banks will miss the RBI deadline to clean up balance sheets by March 2017, with demonetisation now adding to the pressure.”

Post demonetisation, situation has certainly worsened as banks had to redeploy extra staff in November and December to meet the work of remonetisation of high-value currency notes. This added to their operation cost while cash-stricken units struggled even more to repay their dues.

As much as five banks have reported more than 15 % gross NPA ratios (ratio of bad loans/total loans). Indian Overseas Bank reported gross NPA ratio at 22.42 per cent, while UCO Bank reported bad loan at 17.18 per cent ratio. United Bank of India reported 15.98 per cent, IDBI Bank at 15.16 per cent and Bank of Maharashtra at 15.08 per cent gross NPA ratio, as per the Care analysis report.

Although SBI’s NPAs for December quarter was recorded at Rs 1.08 lakh crore as against Rs 1.06 lakh crore in September quarter, but when compared to the same figures a year ago, it is a jump of 48.6 per cent.

Punjab National Bank and Bank of Baroda reported a decline in NPAs on a sequential quarter basis, but posted a year-on-year rise in bad loans to Rs 55,627 crore (from Rs 34,338 crore) and Rs 42,642 crore (from Rs 38,934 crore) respectively.

Wefornews Bureau

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