Public sector banks, barring SBI, continued to witness a jump in their bad loans in the latest March quarter. Restructured assets contributed to this jump.
Gross non-performing loans (NPAs) for public sector banks other than SBI rose by 10.5 per cent in the three months to March 2012. Exposure to troubled sectors such as power distribution companies, aviation, telecom and agriculture has led to slippages in loan quality.
Indian Bank, Central Bank of India, Punjab and Sind Bank and Punjab National Bank witnessed a rise of more than 35 per cent in gross NPAs in the three months ended March 2012. The gross NPA ratio of public sector banks as of March 2012 stood at 3 per cent of the gross advances as compared to 2.25 per cent a year ago.
After provisioning, net NPA ratio stood at 1.5 per cent. This is not alarming, but the sharp jump in restructured assets is a cause for concern.
Restructured assets as a proportion of total advances for public sector banks, which have disclosed these numbers, account for around 5.9 per cent of their advances.
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Restructured loans in the standard category account for 5.4 per cent of the advances. Once again, Indian Bank, Punjab National Bank and Central Bank of India figure in the top list. Indian Overseas Bank, Andhra Bank and Allahabad Bank have also witnessed a sharp rise in restructured loans in FY12.
Around 12 per cent of the restructured loans have slipped into non-performing loans. For the 14 banks which have disclosed the data, restructured loans accounted for nearly a fourth of the total NPAs.
Had these loans not slipped into non-performing assets, the gross NPA ratio would have been 2.3 per cent - in line with private banks - as against 3 per cent.
It is noteworthy that while only 12 per cent of the loans slipped into NPAs till March 2012, around half of the outstanding restructured loans were added in 2011-12. This indicates that the risk of further slippages is higher going forward, if the prospects of Indian economy do not revive.
Overall though, public sector banks did put up a better show than last quarter. They returned to double-digit profit growth in the latest March quarter from barely any growth in the previous quarter.
Excluding State Bank of India's profits, which vaulted from Rs 20 crore to Rs 4,050 crore, the net profit growth for the other public sector banks was 15 per cent year-on-year. Loan growth, lower tax outgo and lower operating expenses drove profit growth.
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