The Hindu Business Line : Non-performing assets of banks on the decline: Report

THE asset quality of scheduled commercial banks (SCBs) has shown a remarkable improvement in 2003-04, according to the RBI report on `Trends and Progress of Banking in India' released on Monday.

The central bank has noted that the gross non-performing assets (NPAs) of SCBs has declined in absolute terms for a second year in succession, despite the switchover to the 90-day delinquency norm, effective March 2004.

Gross NPAs of scheduled commercial banks declined by 5.6 per cent in 2003-04, against a decline of 3 per cent in 2002-03. Due to significant provisioning, the net NPAs declined substantially by 24.7 per cent during 2003-04 against a decline of 8 per cent in 2002-03, the report said.

The decline in NPAs is evident across bank groups. During 2003-04, reductions outpaced additions in the NPAs account. For SCBs, the decline in NPAs was accompanied by the decline in doubtful and loss assets by 8.8 per cent and 15 per cent respectively, the central bank has observed.

The ratio of net NPAs to net advances of SCBs declined from 4.4 per cent in 2002-03 to 2.9 per cent in 2003-04. All bank groups witnessed a decline in the ratio of net NPAs to net advances in 2003-04.

Among bank groups, the old private sector banks had the highest net NPAs ratio at 3.8 per cent, followed by public sector banks, new private banks and foreign banks. During 2003-04, the share of NPAs in the priority sector to total NPAs of public sector banks increased marginally. However, there was a decline in the share of NPAs of agriculture sector and small-scale industries but an increase in the share of other priority sectors.

The share of NPAs on account of public sector undertakings declined while the share of NPA of non-priority sectors increased during 2003-04.

For private sector banks, the share of NPAs on account of agriculture sector was lower when compared with 2002-03. However, there was an increase in the shares of NPAs on account of small-scale industries and other priority sector as well as their overall NPAs for the priority sector.

The share of non-priority sector NPAs in total NPAs of private sector banks was lower than that in 2002-03.

According to the report, the gross non-performing assets ratio of public sector banks has declined to 7.8 per cent in 2003-04 from 23 per cent in 1992-93.

As on June 30, 2004, 27 public sector banks had issued 61,263 notices involving an outstanding amount of Rs 19,744 crore and had recovered an amount of Rs 1,748 crore, under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002.

The number of cases and value of assets restructured under CDR mechanism as on June 30, 2004 stood at 94 and Rs 64,017 crore respectively.