NPAs nearly doubled to 8.5 pc in Q1: Report

Mumbai, Aug 18 (PTI) The banking sector’s non-performingassets (NPA) almost doubled to 8.5 per cent in the firstquarter of this fiscal, driven by surging bad assets ofstate-run lenders, Care Ratings said. The banking system’s gross NPAs shot up to 8.5 per cent bythe June quarter, as against 4.6 per cent a year ago. Thespike was largely due to the doubling of NPAs at public sectorbanks to 10.4 per cent compared to 5.3 per cent in June 2015. However, the rating agency did not quantify the bad loansin absolute terms. Private sector lenders witnessed their NPA ratioincreasing to 3 per cent from 2.1 per cent a year ago, itadded. "The state-run banks have been under pressure to identifyand provide for their NPAs, which could last for another oneto two quarters," the agency said, adding the high NPAs andconsequent provisioning is an "area of concern" that willimpact their profitability going forward. Many state-run lenders reported net losses in the Junequarter, with market leader SBI turning in a 32 per cent dropin net income, while private sector banks’ net collectivelyfell just 2.6 per cent. The agency said given the government’s plan to raisemoney by offloading stakes in banks, profit is an importantissue. "High NPAs and low profitability would not augur well ifthe government is working towards lowering its stake in thesebanks to 51 per cent," it said. However, it termed the recognition of NPAs as a positivestep in the long term as higher provisioning makes thestate-run lenders better prepared to face the market. PTI AABEN NRBABMJMF