HYDERABAD: The great Indian bank clean-up exercise appears to be drawing to a close, with gross NPAs reducing for the second quarter in a row. For the quarter ended September 2018, gross NPAs fell to Rs 9.9 lakh crore, after peaking to Rs10.2 lakh crore in the March quarter, partly led by the controversial February 12 circular. However, bad loans ratio started heading south as recoveries improved.
The first quarter of the current fiscal too saw the sector’s aggregate bad loans reduce to Rs 10 lakh crore, despite fresh slippages. “Gross NPAs are declining and are expected to fall further to about 10 per cent of total advances by March 2019. The reduction is due to two reasons — improved provisioning and write-offs and increasing recoveries,” Anil Gupta, Head of financial sector ratings, ICRA told Express.
For instance, though fresh slippages during June and September quarters stood at Rs 1.6 lakh crore, better loan recoveries, write-offs and upgradations (bad loans turning good) was about Rs 1.8 lakh crore. Consequently, gross NPAs as an absolute number fell from Rs 10.2 lakh crore in March to Rs 9.9 lakh crore in September.
In fact, if the trend continues, bad loans could fall below 10 per cent in the next two quarters, ie, March 2019. Net NPAs too will likely slide to 4.3 per cent from 5.92 per cent as on June 2018. However, in the absence of resolution, gross and net NPAs could be higher at 12.2 and 5.6 per cent respectively, ICRA said in August.
Meanwhile, gross NPAs of state-run lenders fell to Rs 8.6 lakh crore in September quarter, against Rs 8.7 lakh crore and Rs 8.9 lakh crore in June and March quarters respectively. Likewise, net NPAs reduced from Rs 4.5 lakh crore in the March quarter to Rs 4.1 lakh crore in September quarter. According to Gupta, approximately Rs 4 lakh crore worth debt across 40 large borrowers is under resolution and more accounts are expected to be resolved under the Insolvency and Bankruptcy Code, further improving the chances of loan recoveries and upgradations.