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Bad loans at bottom, signal of better asset quality from Sept 2015 quarter results

By:  Ekta( Source: ET, PTI) , Place:  New Delhi ,  Update:13 Nov 2015

Indian banks believe their bad loan problem is bottoming out after getting results of September 2015–quarter of major banks even as sticky loans continued to haunt both public and private sector lenders.

Indian banks believe their bad loan problem is bottoming out after getting results of September 2015–quarter of major banks even as sticky loans continued to haunt both public and private sector lenders.

The top lender's gross NPA ratio had improved to 4.15% as of end September from 4.29% at the end of the previous quarter in June. Net NPA ratio fell to 2.14% from 2.24% during the same period even as provisions for loan losses Rs 3,842 crore fell 7%. Net NPA reflects the bad situation after provisions is made. 


With announcement of 25% rise in in the quarterly net profit  State Bank of India chairman Arundhati Bhattacharya had said , “We are getting to the bottom of the pile (of bad loans)".  And now Lenders expect their asset quality to start getting better here on as economic activity improves cash flows.

The World Bank expects the Indian economy to expand 7.5% this year, up from 7.3% last year. The Reserve Bank of India has, however, reduced its real GDP forecast for 2015-16 to 7.4% from 7.6% earlier, saying growth is expected to pick in the latter part of the fiscal. 

Private sector banks with larger retail lending portfolio pie are much better placed when compared to their public sector peers although they are not completely immune to the curse of bad loans. 

The largest private sector lender, ICICI Bank, saw its gross non-performing assets (NPAs) rising 10 basis points quarter-on-quarter to 3.36% at the end of September 2015 with a fresh addition of Rs 1,300 crore, Rs 931 crore of which was from restructured loans turned bad. Managing director and CEO Chanda Kochhar said the total addition in the bank's NPAs would be lower than last fiscal. Axis Bank's net profit rose 19% in the quarter ended September, but gross bad loans rose 4.7% quarteron-quarter to Rs 4,451 crore. Its gross NPA ratio remained static at 1.38% with expansion of credit. 

However, concerns remain that there could be more skeletons in the cupboard with sectors such as infrastructure, mining, iron and steel, and power are yet to get out of the stress. "We may begin to see an end of the bad loan cycle. There are still one or two large accounts that may hit (us) temporarily," SBI's Bhattacharya said. 

The top lender's gross NPA ratio had improved to 4.15% as of end September from 4.29% at the end of the previous quarter in June. Net NPA ratio fell to 2.14% from 2.24% during the same period even as provisions for loan losses Rs 3,842 crore fell 7%. Net NPA reflects the bad situation after provisions is made. 


 
 
 
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