NPAs in the banking sector on rise

NEW DELHI: Bad assets of the banking sector have increased by Rs 7,718 crore from March 2011 to June 2011, said finance minister Pranab Mukherjee. The gross non-performing assets of public sector banks stood at Rs 78,119 crore at end of June 2011.

"The increase in NPAs has been broadly on account of global economic situations, impact of business cyclicality and economic slowdown" said Mukherjee, adding that delay in implementation of projects due to various reasons which lead to restructuring of accounts was also responsible for the rise in bad loans. The ratio of gross NPAs to gross advances increased form 2.09% in March 2009 to 2.555 as one June 2011 in case of state run banks.

Earlier, Mukherjee had cautioned all state run banks and financial institutions on the downward trend of asset quality. "They (banks) should to exert themselves to devise suitable strategies for containing and rolling back non performing assets," he had said.

The banking sector regulator, Reserve Bank of India had also observed that non -performing assets are becoming stickier and is a cause of concern especially in case of new private sector banks.

Ratings agency ICRA says banks are vulnerable in sectors such as aviation, commercial real estate, microfinance and state power utilities. "Airlines and state utilities may need restructuring which could double the total re-structured accounts," a recent report from the agency said.

Source: EconomicTimes