SURVEY

Banks see an increase in NPA levels

Cash-stash The profitability of the banks took a dip during January-June 2016 due to higher provisioning for NPAs

According to an FICCI-IBA Bankers survey, majority of banks saw an increase in their non-performing asset (NPA) levels between January and June 2016. The survey, held in July, saw a participation of 20 banks including public, private and foreign banks.

The profitability of the banks took a dip during January-June 2016 due to higher provisioning for NPAs. Majority of participating banks believed that the Insolvency and Bankruptcy Code provides an effective mechanism for resolution of insolvency and will help banks in their recovery efforts.

Banks were asked to list some key steps to beef up the capital of Indian banks, given the BASEL III requirements. Majority of participating banks expected that along with capital infusion by the government, more steps were needed to beef up the banks’ capital. Banks need to take measures such as improvement in internal processes, optimisation of the capital allocation, re-balancing of loan portfolio in favour of retail loans, and raising resources through sale of non-core assets.

Additionally, the government can help in beefing up capital by diluting its equity in Public Sector Banks up to 51 per cent, creating bad bank for one-time resolution of bad debts and through mergers and consolidation of banks.

56 per cent of the participating banks' lending portfolio was directed towards corporate lending against 42 per cent for retail lending.

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Topics : #banking

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