RBI: Bad loans to spike from 10.2 per cent to 11.1 per cent in a year

The Reserve Bank has said gross nonperforming assets in the system shot up to 102 per cent as of the September quarter primarily led by private sector lenders and has warned that the situation will only aggravate from there elevating the systemic risks In the halfyearly Financial Stability Report FSR put out late this evening the central bank however said the financial system remains stable overall though it has pegged the bad loans spiking to 108 per cent by the March quarter and to 111 per cent by September 2018 The banking stability indicator BSI shows that the risks remain at an elevated level weighed down by further asset quality deterioration the FSR notesRepresentational ImageOverall the stressed assets including restructured loans and dud loans increased marginally to 122 per cent during the same period from 121 per cent The staterun banks GNPA shot by 100 bps to 135 per cent while the samefor their private sector peers jumped to 380 per cent Incidently the report says private sector lenders considered more prudent are the ones reporting the most stress reporting a whopping 408 per cent spike in their GNPAs as against 17 per cent by the staterun ones whose lazy banking has been blamed primarily for the mess in the system The overall gross nonperforming assets or GNPAs in the system have grown to 102 per cent as of the September quarter from 96 per cent six months earlier when the last FSR was released it saidIt can be noted that all the top private sector lenders including ICICI Bank Axis Bank and Yes Bank and even HDFC Bank have been found to have underreported their dud assets in the recent RBI supervision results of which were recognised over the first two quarters of the fiscal In what should cause more concern for everyone a baseline scenario of the Reserve Bank says the GNPAs ratio will slip further to 108 per cent in the March quarter and 111 per cent by September 2018 In the foreword to the report deputy governor NS Vishwanathan warns that overall risks to the system arising from asset quality concerns continue to persist He warns that though supporting factors exist on external front like increased consumption investment and geographical spread the economy will be able to take advantage of the tailwinds only if the banking sector comes back into good shapeThe central bank notes the Insolvency and Bankruptcy Code regime is showing significant progress in dealing with financial and operational creditors to insolvent companies in a market determined and time bound mannerCorporate governance at the staterun lenders is key to ensuring the success of governments Rs 21 trillion bank recapitalisation programme it says On the growth front the report acknowledges that there has been an uptick after GST and noteban hiccups but warns that corporate deleveraging and muted credit growth by staterun banks that account for 70 per cent of the system pose a downside risksInvestment climate remains challenging as seen from the decline in investment proposals it says noting that events like the sovereign rating upgrade from Moodys progress on stalled projects and efforts to improve quality ofstate expenditure can help revive the inflows The decisive recapitalisation move can provide the much needed fillip to private investment going forward Vishwanathan notesCatch up on all the latest Mumbai National and International news hereDownload the new middayAndroidandiOSapps to get updates on all the latest and trending stories on the go