While the share of non-performing assets (NPAs) in the banking system has risen in the September quarter, the formation of fresh bad loans has slowed down, Reserve Bank of India (RBI) Deputy Governor SS Mundra said on December 7th.
“While there has been an incremental percentage of gross NPAs and net NPAs, there has been a marginal reduction in restructured advances and, after blending the two, there has been a slight uptick in the overall level of stressed assets in the banking system,” Mundra said.
As on September 30, gross NPAs in the banking system stood at R6.7 lakh crore.
Speaking at the post-policy press conference, Mundra added, “The formation of incremental NPAs has decelerated. The provision coverage ratio at the system level has slightly improved and relative to the previous year, in this half-year the recoveries have been better than what they were in the corresponding period and the writeoffs have reduced to some extent.”
Mundra observed that most of the NPAs continue to be contributed by “the usual five-six sectors” from the industry segment that have been the cause for much of the stress in the banking system for the last few quarters. Steel, power, shipping, sugar and infrastructure are the industries which have seen the maximum amount of stress in the last few years.
Deputy Governor NS Vishwanathan said that the central bank had gone beyond what it had said about tweaking certain provisions of the Scheme for Sustainable Structuring of Stressed Assets, popularly known as S4A. The RBI had said on October 4 that it was considering requests from banks to relax certain provision requirements under S4A, following which it had allowed banks to classify the sustainable part of the debt under consideration as standard.
“We allowed the banks to implement the 5/25 rule in some cases up to R250 crore. Of course, last week, we also issued the large exposure guidelines,” Vishwanathan said. “We need to deal with the current stock of NPAs, but also we have tried to find ways to reduce the accretion to the stock that we already have.”
