Three state-owned banks saw bad loans rise more than 200%; six others by 100%

The share and value of the top 30 bad-debt accounts of public sector banks rose in the October-December 2013 quarter. These bad debts, or non-performing assets (NPA), were all from the corporate segment.

Three public sector banks reported a fresh slippage of more than 200 per cent during the quarter. For six other banks, the slippage was more than 100 per cent

According to the agenda paper circulated for the Finance Minister’s meeting with bank chiefs, the average of the ratio of 30 bad-debt accounts to total NPAs rose to 36.7 per cent at the end of December 2013 against 34.3 per cent at the end of December 2012. The agenda paper, however, did not disclose the names of these top accounts.

Small comfort

Data also show that for 20 PSU banks, the share of bad debt in total NPAs has come down despite an increase in the absolute amount.

But both the share and the value have gone up for the SBI Group (State Bank of India and its five associate banks).

On February 5, after holding a review meeting for over three hours with bank chiefs, Chidambaram said that NPAs are high in the large-corporate segment as well as in the small and medium enterprises segment.

With this, he felt that the overall NPAs for 2013-14 were likely to be higher than the 3.84 per cent recorded in 2012-13. The agenda paper also said that bad debts as a percentage of total advances rose to 5.17 per cent at the end of December due to sluggishness in domestic growth and a slower global economic recovery.

It also said that the continuing uncertainty in global markets had resulted in lower exports of textiles, engineering goods, leather and gems.

Bad debts also grew due to factors such as a ban on mining projects and delayed clearances, which affected the power, iron and steel sectors, in particular. Volatility in prices of raw material and shortage of power have impacted the operations of textile, iron & steel and infrastructure companies.

Delays in collection of receivables for infrastructure projects and aggressive lending by banks in the past have also contributed to the rise in the level of bad debts.

(This article was published on March 6, 2014)
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