For every rupee that banks in India have lent in the nine months to December 2013, 13 paise has turned sour and has been classified a non-performing asset (NPA). For United Bank, 60 paise is bad for every rupee lent.
In the nine months during April-December in fiscal 2014, 42 banks have lent R5.02 lakh crore and their gross NPAs for the same period stood at R67,394 crore. In the same period, United Banks gross advances stood at R9, 268 crore, whereas gross NPAs were R5,581.18 crore. Most of the NPAs were, however, added by the public sector banks.
In these nine months, public sector lenders added R63,782 crore of bad loans to their books and accounted for 94% of the total NPAs.
An analyst at a foreign brokerage said that public sector lenders are burdened by bad loans from the mid-corporate and small and medium enterprises (SME). On the contrary, private banks focus on retail customers who account for lower NPAs. PSBs have loans like Air India, Kingfisher and even discoms that have cost them dear, he said.
Overall, gross non-performing assets for public plus private banks increased from 4.0% as on September 30, 2013, to 4.1% as on December 31, 2013. Icra said in a report that the deterioration was primarily because of the slippages posted by the PSBs, for whom the gross NPA ratio increased from 4.5% as on September 2013 to 4.7% as on December 2013. Total restructured assets of the banks increased to R3.6 lakh crore as on September 30, 2013 from R3.4 lakh crore as on March 31, 2013.
Further, if 35% of the restructured advances (excluding restructured exposure to state power utilities and Air India) are assumed to be weak, the PSBs adjusted gross NPA ratio would be higher at around 6.3% as of December 2013, said Icra.
An instance of bad loans affecting a banks business is United Bank of India.
The lenders stressed assets were not detected for the last two to three years which suddenly ballooned in Q2 and Q3 FY14. The banks NPAs at the end of the FY14 December quarter were R8,545.5 crore, up 194% when compared to R2,901.7 crore in the same quarter last fiscal.
HSBC analysts in a report on Indian banks said that despite plateauing of impaired loans for PSU banks, credit costs likely to rise given no visible turnaround in the credit cycle. Also, the restructured book continues to bulge,