NPAs in Banks – June 2017: This is how things stand

One of the major challenges for the Indian banking system is to address the NPA issue which has also affected the profitability of banks besides coming in the way of future bank lending as banks have been cautious while lending especially for long term purposes. Various measures have been attempted to address this issue with the IBC being the latest one where some of the larger NPAs have been identified for speedy resolution. The outcome would be known in course of time.

Meanwhile, the performance of banks with respect to NPAs has not been too positive of late. While it was largely expected that the NPA ratios would have settled by March 2017 as there were indications of stabilization relative to December 2017, the picture emerging for Q1-FY18 is that the NPAs have deteriorated further for the system as whole.

In Q1 FY18, non-performing assets (NPAs) of a sample of 38 banks increased by a sharp 34.2% on a y-o-y basis. Also the NPA ratio increased to 10.21% in June 2017 from 8.42% in June 2016, which is the highest in the last six quarters.

On a q-o-q basis, the increase in NPAs have been the highest in Q1 FY18 witnessing an increase of about 16.6% to reach Rs 829,338 crore as of June 2017.

Source: Ace Equity
Source: Ace Equity
NPAs in Banks – June 2017: This is how things stand

Bank-wise Gross NPAs

Source: AceEquity
Source: AceEquity

– State Bank of India accounted for the largest share of about 22.7% in the total NPAs during the quarter. The NPAs stood at Rs 188,068 crore as of June 2017

– Top 5 banks together – SBI, PNB, BOI, IDBI, BOB account for a share of 47.4% totaling to Rs 393,154 crore

– 11 of the top 12 banks in terms of NPAs are public sector banks (PSBs) with the exception being ICICI Bank.

  • ICICI Bank accounts for about 5.2% share in the total NPAs during the quarter.
  • Top 12 banks together account for 75.7% share

– Public sector banks appear to be definitely more stressed than private banks

– ICICI Bank and Axis Bank are the only private sector banks in the top 15 with a combined share of 7.9% in the total NPAs

Bank-wise ratios

Source: AceEquity
Source: AceEquity

– The top 20 banks with highest NPA ratios are public sector banks (PSBs)

– The top 2 banks, namely IDBI Bank (24.11%) and Indian Overseas Bank (23.6%) have NPA ratios of over 20%

– Indian Bank is the PSB with lowest ratio of 7.21%.

– Top 8 banks have an NPA ratio of over 15% as of June 2017.

– YES Bank is the only bank with a ratio of just less than 1.

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