BANKS CRUSHING UNDER THE WEIGHT OF NPA

By Rekha Chauhan
17-May-2018 10:44:05 AM
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BANKS CRUSHING UNDER THE WEIGHT OF NPA

Earning seasons is going on, with companies and bank reporting their Q4 earning of Fy18 on every second day. Till now total of 20 banks including public and private sector banks have reported their earning, with most of them showing losses amid rising NPA.

Bank Crushing Under The Weight of NPA

Punjab National bank,reported a loss of Rs 3,835 crore in the fourth quarter. UCO bank suffered 10th consecutive quarterly loss. Dena Bank loan widened to Rs 1,225.42 crore from Rs 575.26 crore in the January-March quarter in FY17.Oriental Bank of commerce  loss widened to to Rs1,650.22 crore for the fourth quarter 2017-18, as against Rs1,218.01 crore reported a year ago. Amid three fold rise in provision, Canara Bank  loss widened to Rs 4,859.77 crore.

 

Private sectors banks also had similar story with piling up NPA’ s in their kitty. Among the private banks, AXIS bank and ICICI bank reported highest NPA among their peers of the Industry. AXIS bank reported net loss of Rs2188.74 crores against profit of Rs1,225.10 crore in the corresponding quarter last year. ICICI bank  reported a drop in net profit by whopping 45% to Rs 1,142 crore for the quarter ended 31 March 2018 from Rs 2082.75 crore from previous quarter. During Q4-2018,the gross additions to NPA were Rs 15,737crore in Q4-2018.

 

Thus till now,of all the banks reported their earning saw rise in NPA  to 8.32% of all  loans I n their books, which was 7.17% of loans in book for the corresponding quarter a year ago.

 

These NPA’s are not only affecting the profitability of the banks but also depriving retail customers from some relief on the loans taken by them. Rising provision for NPA’s has proved to be hurdles in the flow of benefits of monetary policy to bank lending rates. Rising NPA has affected the net interest margin of the bank, which is difference between interest paid on deposits  and interest earned on loan provided.

 

Further a paper release by RBI on bank also pointed on the deteriorating asset quality of the banks since 2011. Lower provisions for the potential losses also affected the profitability .Provision coverage ration continued to rise , but not enough to cover the existing bad loans. As per the RBI, provision coverage ratio (PCR) increased from 40.3% at 2014 March-end to 41.9% in March 2016 then to 43.5% in March end of 2017

 

As of now, total distressed amount has piled up to the level of Rs10 lakh crores. Thus amid rising NPA an rising provision for the same has axed the profits of banks cumulatively by 61.7%.To make the banking strong , Banks have to work to reduce their NPA, then only will the bank have strong base and will be able to pass on the benefits of monetary policy of lower rates to the consumer’s end.

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Neeraj Tripathi
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Neeraj Tripathi
1 year 5 months ago

Is there any way out to reduce or avoid the burden of NPAs?

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