Page 44 - Banking Finance July 2024

ARTICLE

of their equity in the capital market and gradual reduction increased to 5.45 percent in 2019-20 from 2.1 percent in
of SLR & CRR to improve profitability. After liberalization of 2015, which is more than double. As per the data, foreign
financial sector in India, economic activities have increased banks recorded a rapid increase in their NPA figures
manifold during the last three decades and the going strong. beginning in 2013 (three percent) and reached its peak level
Presently we have 12 PSBs, 21 private sector banks in India (4.2 percent) in 2016. While the GNPA ratio of PSBs and
along with 20 foreign also operating through their branches. private banks followed an upward movement beginning
2016, foreign banks witnessed a decline in their GNPA ratios.
If we look on the volume of non-performing assets, we may
come to know that in the year 1995, NPAs of PSBs were Rs The bank-wise analysis of NPA data of all PSBs shows that
38385 Crores and for Private sector banks were Rs 6410 the GNPA ratios started increasing, beginning in 2011. Most
Crores, which reached to 71047 Crores and & 17791 Crores of the PSBs recorded an increase in their GNPA ratios during
respectively in 2011. The PSBs posted combined losses of Rs. that year. The GNPA ratios of UCO Bank, United Bank of
85,370 crores in 2017-18, Rs. 66,636 crores in 2018-19, and India, Punjab National Bank, Oriental Bank of Commerce,
Rs.25,941 crore in 2019-20, adding up to an aggregate of and Central Bank of India were among the highest in this
nearly Rs.1.78 lakh crore over those three years. NPAs on group in the years after 2011. The GNPA ratio of UCO Bank
the books of banks have ballooned after the RBI issued new increased to 24.64 percent in 2018 from 3.73 percent in
guidelines for asset quality recognition (AQR) in 2015. 2011. The GNPA ratio of United Bank of India increased to
24.10 percent from 3.41 percent, of Punjab National Bank
The ratio of NPAs to advances rose from 5 per cent in 2014- to 18.38 percent from 3.15 percent, of Oriental Bank of
15 to a peak of 14.5 per cent in March 2018. Banks were Commerce to 17.63 percent from 3.17, and of Central Bank
forced to provide additional funds to cover for these bad of India to 21.48 percent from 4.83 respectively during the
assets as per RBI guidelines resulting in mammoth losses. same period.
Over 2017-18 to 2019-20, gross NPAs rose by Rs. 59,107
crores, whereas net NPAs fell by Rs. 1,13,572 crores. This Large banks like the SBI also registered an increase in their
means that provisions amounted to Rs.1,72,679 crore, GNPA ratio. During the same period, the GNPA ratio of SBI
compared with cumulative losses of Rs.1,77,947 crore rose to 10.9 percent from 4.4 percent. Beginning in 2015,
recorded during the period. Clearly, provisioning played a the GNPA ratio of almost all PSBs registered a rapid increase
role in generating the losses. in bad loans. Bank group-wise distribution of NPAs suggests
that PSBs constituted more than three fourths of the NPAs
Burgeoning NPA amongst the all banks in India at that point. The NPA share
of PSBs declined to 75.7 percent in 2019-20 after the peak
The lasting crisis in India's banking system is largely due to
the unprecedented accumulation of bad or non-performing of 88.3 percent 2015-16. On the other side, the share of
private banks in NPAs increased to 23 percent in 2019-20.
loans. All banks, irrespective of their ownership have
registered substantial volume of bad loans, though the Their NPA share increased rapidly to 23 percent in 2019-20
incidence of NPA is prevalent in PSBs. The widespread from 9.1 percent in 2015-16. The NPA shares of foreign
prevalence of bad loans came to light with the conduct of banks have declined substantially in recent years. Their NPA
asset quality review (AQR) in 2015 by the RBI. The ratio of share declined to 1.1 percent in 2019-20 from 4.4 percent
NPAs to total advances (GNPA ratio) of scheduled in 2013-14.
commercial banks (SCBs) has risen significantly to a
mammoth 11.2 percent in 2017-18 from a moderate NPA Measures

of 2.2 percent in 2007-08. The Government has introduced the "Indradhanush", which
is a seven-pronged plan in August 2015 to revamp the Public
The NPA figures of the PSBs increased significantly to 14.6 Sector Banks because thousands of crores of public money
percent in 2017-18 from 2 percent in 2008-09. Between is at stake in these banks. One significant action has been
2015 and 2018, there was a rapid increase in the NPA figures taken by the Government under the Indradhanush Yojana
of PSBs and private banks. The NPA figures of PSBs rose to to set up a Bank Board Bureau (BBB) to facilitate the
14.6 percent in 2018 from 5 percent in 2015, which is almost appointment of top officials at the PSU Banks. As per the
three times higher. Similarly, the GNPA ratio of private banks new framework of the Department of Financial Service,

40 | 2024 | JULY | BANKING FINANCE