No Relief To Indian Banks As Bad Loans In Dec Quarter Continue To Rise

Indian banks which claimed to have recorded high growth numbers in the past few quarters have been plagued with excessive bad loans or new non-performing assets

State Bank of India, Axis Bank, Bank of Baroda, Punjab National Bank and several other top banks have reported a sharp increase in new NPAs or slippages in the December quarter, pointing at the continuous troubles of asset quality and credit risk associated with it, The Economic Times reported.

Banks Report Rising Slippages

State Bank of India witnessed its new NPAs almost double to the tune of Rs 16,525 crores, from Rs 8,800 crores reported in the September quarter.

Axis Bank recorded fresh NPAs worth Rs 6,214 crores in the December quarter as against Rs 4,983 crores reported in the second quarter.

Kotak Mahindra Bank also added bad loans worth Rs 1,062 crores in its third quarter.

"Progressively, every quarter you see new bullets and these are in the realm of unknown. You don't expect these bullets to be shot but they are and it's not a sectoral problem, it's an entity level problem," said joint MD, Kotak Mahindra Bank, Dipak Gupta, adding, "The approach is I must move cautiously. Once you see the road ahead is clear, then you can move fast."

The new bad loans at Bank of Baroda rose drastically to Rs 10,387 crore for the December quarter after it was merged with Dena Bank and Vijaya Bank.

Punjab National Bank, another state-run lender, also reported an increase in fresh bad loans at Rs 7,400 crore but cited uneven corporate stress formation as the reason.

Several banking sector experts have claimed that while the stress formation is visible, fresh additions in bad loans have been reported.

"This quarter, banks have reported lumpy slippages, especially from the corporate sector, but the silver lining is that these are largely from known accounts like DHFL, CCD, Cox & Kings etc., so the assumption is that slippages could peak soon," said analyst, Yes Securities, Rajiv Mehta.

In a recent report by India Ratings, the proportion of stressed corporate assets reduced to 17.9% of total bank credit at end-September 2019 as against 19.3% in the same period last year.

This decline was mainly on the back of write-offs worth 1.8% of total bank credit and improvements in credit profiles of accounts constituting 0.4% of total bank credit.

However, fresh additions continue to plague the banks even though data claims that asset quality issues have improved.

"These have been partially offset by the impact of additions of about 2.4% to stressed assets from both corporates and non-banking financial companies," the report noted.

"While we believe the majority of stressed corporates have undergone rapid credit migration in the last few years, the aversion of bankers to take on additional risk could result in more slippages than estimated," it added.

RBI's Report On Bad Loans

According to a recent report by the Reserve Bank of India on Trend and Progress of Banking 2018-19, Indian lenders have the highest percentage of bad loans as against 10 emerging economies including Brazil, China, Indonesia, Philippines and Turkey.

The report also reveals even though bad loans improved to 9.1% in March 2019 from an earlier 11.2% in the same period last year, most of them fell due to write-offs by banks. The report also found that the number of frauds reported by banks during 2018-19 rose to Rs 71,543 crore from an earlier Rs 41,167 crore in the previous year.

Also Read: India's Bad Loans at 9.1%, Highest Among 10 Emerging Economies In World: RBI