Bad loans of Indian banks cross Rs 8,00,000 cr: Banking mess explained in 7 charts

Total bad loans of India’s 38 listed commercial banks have crossed Rs 8 lakh crore at the end of June quarter. This chunk now accounts for nearly 11 percent of the total loans given by the banking industry. Over 90 percent of these sticky assets are on the books of government-owned banks. These banks constitute about 70 percent of the total banking industry, in terms of assets, meaning the government will have to bear the burden of massive capital requirements of crisis-ridden industry. Higher bad loans require banks to set aside more money in terms of provisions. The provision amount varies on a case to case basis. In recent years, Non-performing assets (NPAs) have emerged as a major headache for the government and the Reserve Bank of India (RBI). Clearly, both the RBI and government woke up to the problem too late. The government has so far failed to infuse the required capital for state-run banks. The actual bad loan scenario in the sector could be even worse if one accounts for the amount of loans that are being restructured under various schemes and are technically retained as standard on the books of banks. If the economic cycle doesn’t pick up as expected, a significant chunk of such loans too may turn bad. Former RBI officials have warned about this hidden problem.  “I’ll put the figure around Rs 20 lakh crore… One should include all troubled loans including reported bad loans, restructured assets, written off loans and bad loans that are not yet recognised,” Former RBI deputy governor KC Chakrabarty had earlier told Firstpost in an exclusive interview. The Modi government has time and again blamed the previous UPA-regime for the bad loan mess, saying NPAs are a legacy issue. It is not yet clear whether the government is seized of the enormity of the problem. Indeed, the government has taken steps to address the bad loan problem like the NPA ordinance giving the central bank more power to direct banks to take action against loan defaulters and passage of Insolvency and Bankruptcy Code (IBC). While these steps are welcome, these are unlikely to help overcome the bad loan problem in the immediate future. It will take years before banks can get rid of NPAs accumulated over the years on account of multiple factors. The following seven charts give us various aspects of India’s bad loan crisis:

Gross NPAs in Rs crore Infogram

The Asset Quality Review (AQR) initiated by RBI under former governor Raghuram Rajan and implemented from Q3 of FY16 resulted in a massive jump in gross NPAs. The figure more than doubled to Rs 8.29 lakh crore in June 2017 compared with Rs 3.51 lakh crore in September 2015, an addition of Rs 4.78 lakh crore in just seven quarters. In the first two quarters of implementation of these guidelines, the sector has seen Rs 2.45 lakh crore jump in gross NPAs. While in December 2015 quarter, gross NPAs surged by Rs 1 lakh crore, in March 2016 quarter this portion went up by another Rs 1.44 lakh crore. The RBI bad loan clean up process cannot be blamed for the escalation of NPAs, as it only forced banks to report the actual NPAs that were so far hidden in their balance sheets. At some point, this process had to be started.

PSBs gross NPAs in Rs cr Infogram

Public sector banks (PSBs), which accounted for 90 percent of the total gross NPAs of the banking sector, has seen their gross NPAs jumping past Rs 7 lakh crore in June 2017 quarter. In the past seven quarters, it jumped by Rs 4.18 lakh crore or 133 percent to Rs 7.33 lakh crore in June 2017 quarter from Rs 3.14 lakh crore in September 2015 quarter.

Private banks’ gross NPAs in Rs cr Infogram

Gross NPAs of 17 private banks soared by 161 percent to Rs 96,201 crore in June 2017 quarter from Rs 36,878 crore in September 2015. The bad loan scenario of private banks as compared to their counterparts in public sector is much better. But, even there, there isn’t immunity to the problem.

PSBs with higher gross NPAs (Rs cr) Infogram

State Bank of India (SBI), India’s largest lender by assets, tops the bad loan chart. The bank has Rs 1.88 lakh crore of gross NPAs as on 30 June 2017. The figures now includes NPAs of five of its associates after the merger. SBI’s combine gross NPAs surged by 150 percent or Rs 1.13 lakh crore to Rs 1.88 lakh crore in the June quarter from Rs 75,068 crore in September 2015. Punjab National Bank (PNB) comes second in the list with Rs 57,721 crore gross NPAs, followed by Bank of India (Rs 51,019 crore), IDBI Bank (Rs 50,173 crore) and Bank of Baroda (Rs 46,173 crore).

Private banks with higher gross NPAs (Rs cr) Infogram

ICICI Bank with Rs 43,148 crore gross NPAs tops the list. Its bad loans soared by 172 percent or Rs 27,290 crore in the past 7 quarters from Rs 15,858 crore in September 2015 to Rs 43,148 crore in June 2017. Axis Bank stood at second position with Rs 22,031 crore bad loans. HDFC Bank was the distant third with Rs 7,243 crore of gross NPAs.

PSBs with higher gross NPAs as % to advances Infogram

As mentioned earlier, state-run banks are the primary victims in the bad loan story. IDBI Bank with 24.11 percent tops the list. That means every Rs 24 out of Rs 100 lent by the bank has not come back. Indian Overseas Bank follows with 23.6 percent gross NPAs and UCO Bank with 19.87 percent. Out of 21 state-run banks, 17 lenders recorded over 10 percent gross NPAs as percentage of their advances as of 30 June 2017. Another two had gross NPAs close to 10 percent each, while eight PSBs have gross NPAs of over 15 percent.

Pvt banks with higher gross NPAs as % to advances Infogram

Among 17 private banks, Jammu & Kashmir Bank tops the bad loan table with gross NPAs of 10.79 percent of its total advances as of 30 June 2017. ICICI Bank figures second in the list with 7.99 percent bad loans and Kerala-based Dhanalaxmi Bank follows next recording 5.62 percent of its loans as bad in the June quarter.