RBI cautions banks on bad debt

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SME Times News Bureau | 09 Feb, 2015
The Reserve Bank of India (RBI) Monday said it has cautioned lenders on the need to improve asset quality and curtail non-performing assets (NPAs) which have increased in the recent past.

Speaking to reporters in Mumbai, RBI's Deputy Governor R. Gandhi said asset quality has always been a concern following the global financial crisis.

"We have been continuously cautioning banks about slippage of stressed assets and we have been guiding banks in recovering," Gandhi said.

The prolonged and steep economic downturn, accompanied by high interest rates, has led to a sharp deterioration in asset quality for the banking sector and increased the pressure of NPAs.

The percentage of gross non-performing assets (GNPAs) for the banking sector is expected to worsen from 3.9 percent of advances in fiscal 2013-14 to about 4-4.2 percent in 2014-15, Moody's analyst ICRA has said in a report.

Bad and restructured loans crossed 10 percent of all loans in mid-fiscal 2013-14 and are expected to touch the 15 percent mark by the end of the financial year 2014-15.

During the April-December period last year, the banks had recovered Rs.18,933 crore, which is only about 20 percent of the total non-performing assets of about Rs.192,000 crore in the banking system.

Earlier, Finance Minister Arun Jaitley had said that banks are taking a number of steps against wilful defaulters to recover loans as there has been a major spurt in NPAs.

"It is normal for the banks to have 2-3 percent of NPA. But in the last 2-3 years, the NPA has increased substantially and gone up to 6 percent. Stress assets have also increased," Jaitley had told the Lok Sabha during the question hour.