Banks' non-performing assets move towards peak

05 October, 2012

The net non-performing assets (NPAs) of the banking sector in India are increasing at an alarming rate and may cross Rs 2 lakh crore for the fiscal year ending March 2013 from Rs 1.57 lakh crore as of June, 2012.

THE CONTINUING pressures on Indian economy may also result in pushing the NPA ratio from 2.94 in June end to about 3.75 by the end of the current fiscal, reveals the study titled ‘Growing Heat of NPAs on Banking Sector,’ released by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

“Existing exposure of banks to poor performing sectors like power, aviation, highways, micro-finance institutions (MFIs), ports, telecommunication and others have lead to high levels of stress assets,” said D.S. Rawat, Secretary Genaral, Assocham, in a statement.

The study has further projected that banks’ restructured advances would also be as high as about six per cent by March, 2013. The further impact of the various external factors like – court interventions, delay in reforms, reluctance of passing cost to consumers, absence of clarity on various tax issues, have created an environment of uncertainty resulting in slow pace of economic activities.

Apart from this, growing slackness in performance of small and medium enterprises (SMEs) and agriculture sector are signs enough to show that banks’ NPAs are bound to rise, according to the study.

Besides, a strong deceleration expected particularly in fourth quarter of the current fiscal and first quarter of the next fiscal will also have a negative impact on asset quality of Indian banking industry.