Banks’ non-performing assets have shot up nearly 30% at the end of calendar 2009 from a year ago due to stress in many sectors and farm loan waiver, indicating sharply lower profits for banks and possibility of curbs on exposure to sectors that have contributed to the bad assets.
In a reply to the Rajya Sabha, the government said the overall NPAs have increased to Rs 80,023 crore at the end of December 2009 from Rs 61,647crore at the end of December 2008, an increase of over 30%. “Banks will be more cautious towards lending to sectors such as real estate, exports and even retail loans,” says a senior banker with a private bank. A number of private banks have already curtailed their retail lending, specially personal loans.
A recent report by Fitch ratings on ‘banks’ restructuring loan portfolio’ pointed that restructured bank loans worth Rs 30,675 crore may turn bad in 2010-11 and further push up banks’ gross non-performing assets (NPAs) on an average by one percentage point.
State-owned banks, however, feel that the rising NPAs will not impact their profitability and that NPAs are minuscule as compared to the total advances.
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