Address issue of retail NPAs too: BCG report

There is an uptick in retail non-performing assets (NPAs) and this merits the attention of banks with great urgency, according to a BCG report released on the occasion of the annual FICCI-IBA Banking Conclave. While retail NPAs in gross terms came down from 3.2 per cent in 2011 to 1.5 per cent in 2014, they edged up to 1.6 per cent in 2015.

The report said a lot has been written about the growth in NPAs in Indian banking and the focus has been on the corporate and MSME segments, where for a range of reasons, the NPAs have gone up dramatically.

In 2015, the banking sector’s NPAs in the corporate and MSME segments rose to 5.2 per cent (from 4.6 per cent in 2014) and 7.4 per cent (5.4 per cent), respectively. In the agriculture segment, it rose from 4 per cent to 5.2 per cent.

“Retail business has been an oasis of quality for the last few years, where NPA levels had been coming down continuously for all types of players in the industry. However, the trend seems to be reversing.

“Across all types of players, we notice an uptick in retail NPAs,” said the report.

The BCG report also observed that banks have beefed up bad debt management over the past few years, but that has been mostly for commercial credit.

The capabilities required to contain bad debt in retail are substantially different from commercial credit.

“The number of accounts is large, the amounts are small, rapid action is very critical, and steps have to be institutionalised,” said the report.

Doubtful accounts must be pursued well in advance with analytics and predictive modelling, it added.

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