The gross non-performing asset (GNPA) ratio of 13 public sector banks (PSBs) that peaked in December 2016, have remained just about an average basis. However, compared with March 2015, the growth in NPA jumped 143% in March 2017, says a research note.
According to Care Ratings, since March 2016, these banks have continued to witness an increase in NPAs with an increment of about Rs50,000 crore in the next four quarters till March 2017. It said, "This increase was spread quite evenly across the four quarters – Rs20,217 crore in Q1, Rs11,128 crore in Q2, Rs8,318 crore in Q3 and Rs10,642 crore in Q4 (see chart below). Compared with March 2015, growth by March 2017 was 143%. These high NPAs have been a major reason for pressure on profitability as they have been making progressively higher provisions on this count."
In the report, the ratings agency says, "The indication is that there is a mixed picture for PSBs so far, and while at the aggregate level, it appears to have stabilised, the ratio has come down for fight of the 13 banks which could improve going ahead. For the other five banks, another quarter’s performance would be critical for drawing any conclusion on whether or not the worst is over."
According to report, five PSBs, Central Bank of India, Bank of Maharashtra, Dena Bank Andra Bank and Punjab & Sind Bank the NPA continue to at peak levels during March 2017.
Care Ratings says, in terms of the Gross NPA ratio (see chart below), there has been a continuous increase from March 2015 onwards, with two sharp spikes witnessed first in December 2015 by 1.5% and then by 2.67% in March followed by 1.17% in June 2016. Subsequently, the NPA ratio has almost touched 12% by December 2016 and remained virtually unchanged by March 2017, it added.
"The question posed is whether this is a plateau reached by these banks or whether the number could increase in the coming quarters. Some of these banks have reported that they have managed to lower the volume of NPAs at a faster pace than fresh slippages, which is a positive sign for the system as it does indicate that the worst may be behind us," the ratings agency said.
The Reserve Bank of India (RBI) had asked banks to complete the process of asset quality recognition by March 2017. "Prima facie there is reason to believe that the numbers should not increase subsequently and whatever is recognized would be more on new loans rather than the existing portfolio. This would hold especially for banks which have recorded lower NPA ratios in March 2017 compared with December 2016," Care Ratings concluded.