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S. Bridget Leena

Chennai, Nov. 13 Although some rating agencies had forecast that Indian banking industry would have a build-up of bad loans close to six per cent in 2008-09, bad loans were only four per cent of the total advances said, Mr D.P. Rath, Director, Department of Economic Analyses and Policy, Reserve Bank of India.

Mr Rath said that the bad loans were about 2.3 per cent after taking into account restructured loans. The RBI had permitted reschedule and restructure of standard assets, which were likely to become bad loans.

Gross NPA to gross advances ratio of public sector banks declined but that of private and foreign banks increased in 2008-09 compared with the previous year. Bad loans fell to 2 per cent from 2.2 per cent for public sector banks. However, for private banks it rose from 2.5 to 3.1 per cent and for foreign bank it moved up to 4 per cent from 1.8 per cent.

Indian banks recovered a higher amount of bad loans during 2008-09 compared with the previous year. Though the total amount recovered and written-off, at Rs 38,828 crore in 2008-09, was higher than Rs 28,283 crore in 2007-08, it was lower than fresh addition of NPAs (Rs.52,382 crore) during the year. As a result, the gross NPAs of commercial banks increased.

In spite of pressures of a slowdown in the economy and an atmosphere of uncertainty, the net NPA to net advances ratio increased only marginally to 1.1 per cent as at end March 2009 from one per cent as at end March 2008.

Significantly, gross NPA to gross advances ratio remained constant at 2.3 per cent. Thus, in terms of the two crucial soundness indicators, capital and asset quality, the Indian banking sector has exhibited resilience amidst testing times, he said.

The Capital to Risk-weighted Assets Ratio, a measure of the capacity of the banking system to absorb unexpected losses, improved further to 13.2 per cent at end-March 2009 from 13 per cent at end-March 2008, Mr Rath said.

More Stories on : Non-Performing Assets | Credit Market | RBI & Other Central Banks

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