Bank loans that aren’t non-performing assets (NPAs) just yet but could turn toxic amount to over Rs 6 lakh crore or close to 9% of total advances, data sourced from the Reserve Bank of India (RBI) show. The total troubled loans of Rs 6,24,119 crore at the end of December 2015 were 9% higher than the Rs 5,73,381 crore at the end of June 2015.
While Rs 3,06,180 crore worth of loans were classified in the SMA-1 category where repayments are overdue between 30 and 60 days, another Rs 3,17,939 crore was in the SMA-2 category where repayments are overdue between 60 and 90 days.
These special mention accounts follow a fiat from the RBI in 2014 asking banks to put in place a mechanism to red-flag troubled loan accounts early in the day so that these could be dealt with speedily. If the loan is not serviced after 90 days, it must be classified as an NPA.
Since these are standard accounts, the provisioning requirements are small at just 0.4%. However, envisaging that some of this exposure could become stressed, the central bank had asked lenders to provide more than the mandated amount. After taking a close look at banks’ exposures, the RBI chose to flag some 150 accounts that had either turned toxic or were in danger of getting there. It asked lenders to provide adequately for this “emerging stress” and called for exposures to be classified uniformly across a consortium to ensure any stress was captured evenly.
The central bank wants banks’ balance sheets to reflect the true quality of assets by March 2017. This “clean-up” has begun and resulted in a sharp jump in provisioning for most state-owned lenders in the December quarter. The additional capital that would be needed to be set aside is estimated at around Rs 50,000-70,000 crore and lenders must provide adequately for the 150 accounts by March 2016.
On a rough reckoning, troubled loans at 27 public sector banks stood at R2.67 lakh crore. While State Bank of India’s SMA-2 accounts stood at Rs 60,228 crore, or 5.17% of its total advances, at Punjab National Bank this exposure is approximately 6.31% of its total loan book or R24,824 crore.
Between them, 21 private sector banks have `49,689 crore of troubled exposure. ICICI Bank tops the list with `10,897 crore worth of SMA-2 loans, followed by Axis Bank with `9,549 crore and Yes Bank with `7,066 crore.
The total stressed assets for the banking sector — the sum of restructured loans and NPAs — rose to 11.3% in September 2015 from 11.1% in March, RBI data show. Public sector banks have seen their NPAs rise sharply over the last couple of years as the economy slowed and companies’ cash flows became strained. Gross NPAs at Central Bank of India at the end of Q3FY16 stood at 8.95%, at PNB they were 8.47%, at SBI they were 5.1% and at ICICI Bank they were 4.72%.
In the past, banks have often delayed adequate provisioning by restructuring loans and giving companies easier repayment terms. However, the central bank withdrew the forbearance from April 2015 mandating that “restructured” loans should be provided for at 15%. In FY15 alone banks restructured loans worth `72,000 crore through the corporate debt restructuring cell, on the back of recasts to the tune of `1 lakh crore in FY14.
The central bank had also directed banks to provide credit information regarding their exposures above `5 crore to the Central Repository of Information on Large Credits. As soon as an account is classified under SMA-2, banks have to form a lenders’ committee called the joint lenders’ forum to evaluate the asset and work towards early resolution of stress in the account.
No comments :
Post a Comment