Mounting Bad Loans Put Kerala Banks in Distress

Published: 10th February 2016 07:17 AM  |   Last Updated: 10th February 2016 07:17 AM   |  A+A-

KOCHI:  It seems that the bad loans of Kerala-based banks have increased significantly over the years.

According to latest data, listed banks based in Kerala have total non-performing assets (NPAs) worth Rs 6,024.14 crore. As at December 31, 2014, the value of bad loans was Rs 5,649.27 crore, compared to Rs 5,364 crore recorded on December 31, 2013.

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Of-late, State Bank of Travancore (SBT), Federal Bank, Dhanlaxmi Bank and South Indian Bank have been shifting their focus to retail lending after burning their fingers in corporate credit.   In value terms, the non-performing assets of SBT is the highest, at Rs 2,603.9 crore. In percentage terms, Thrissur-based Dhanlaxmi Bank tops the list with gross non-performing assets at 8.75 per cent of total lending, as at September 30, 2015.   In 2014, bad loans of Kerala banks witnessed an overall growth of 5.32 per cent, compared to December 2013.   “The increase in non-performing assets is attributable to the general slowdown in economy. The banks are currently shifting their focus to retail lending from corporate loan disbursement. If the government announces investor friendly proposals in the upcoming Budget, there would be a revival in the banking sector,” said South Indian Bank chief financial officer C P Gireesh.

Thrissur-based Catholic Syrian Bank (CSB), though not a listed bank, reported a net loss of Rs 53 crore in fiscal 2014-15 on a total income of Rs 1,672 crore and capital adequacy ratio of 11 per cent. In the first half of 2015-16, CSB reported a net loss of Rs 41 crore on total income of Rs 814 crore.

“The weak performance of core industries such as steel has impacted the credit quality of many banks. Due to the increase in bad loans, banks have been forced to review and redraw their strategy, which was earlier in favour of corporates. The banking sector as a whole is in distress due to bad loans, and a recovery is not visible in the near future,” said G Sanjeev Kumar, financial analyst and founder of online financial planning firm Prognoadvisor.com.

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