Corporate bad loan is 75% of total PSU loan

One of the good things to have happened because of the jeweller Nirav Modi's fraud of $1.8 billion, is the focus that the mainstream media has been giving to public sector banks.

News channels which did not have any discussion on the bad loans of Indian public sector banks touching almost Rs 7,00,000 crore, are now staging fist fights with the prospect of Rs 11,400 crore ($1.8 billion in rupees) being further added to the overall bad loans of these banks.

Bad loans are essentially loans in which the repayment from a borrower has been due for 90 days or more.

So what's the problem facing public sector banks? It's clearly not the aam aadmi, i.e. individuals who take on loans from banks, or what in banking parlance is referred to as the retail loan business. That has been working just fine. The aam aadmi has been taking loans and paying his EMIs on time.

The problem is with the fat cats, the seths, the big businessmen, the corporates, who have made a habit of taking bank loans and not repaying them. Nirav Modi is just another addition to that long list.

Take a look at Table 1. It basically lists corporate bad loans as a proportion of corporate lending, for public sector banks other than the State Bank of India. It also lists out overall bad loans of these banks.

Table 1:

Year	Corporate bad loans (in %)	Total bad loans (in %)
2012-2013	3.61%	3.24%
2013-2014	4.97%	4.09%
2014-2015	6.12%	5.26%
2015-2016	14.96%	10.69%
2016-2017	19.13%	12.95%

Source: Author calculations on data from Rajya Sabha Unstarred Question No: 278 and www.rbi.org.in.

As can be seen from Table 1, by 2016-2017, nearly one out of every five rupees of corporate loans that India's government owned banks had given (except the State Bank of India) had been defaulted on. For the State Bank of India, the situation was a little better with a default rate of 13.7% (for mid corporate and large corporate loans).

While Table 1 tells us what the problem is, it does not show us the enormity of the problem. For that we need to look at data in a slightly different way. The question that we need an answer to is: what portion of the total bad loans do corporate bad loans make up for?

As of March 31, 2017, corporate bad loans made up for nearly 69% of overall bad loans of public sector banks. Take a look at Table 2. It basically lists out, the total corporate bad loans along with the total bad loans, of each public sector bank, for 2016-2017.

Table 2:

Name of the bank	Corporate bad loans (in Rs crore)	Total bad loans (in Rs crore)	Corporate bad loans as a proportion of total bad loans
Allahabad Bank	17,198	20,688	83.13%
Andhra Bank	14,237	17,670	80.57%
Bank of Baroda	21,153	42,719	49.52%
Bank of India	32,786	52,045	63.00%
Bank of Maharashtra	11,904	17,189	69.25%
Bharatiya Mahila Bank Ltd.	50	54.99	90.93%
Canara Bank	22,418	34,202	65.55%
Central Bank of India	19,323	27,251	70.91%
Corporation Bank	13,063	17,045	76.64%
Dena Bank	8,395	12,619	66.53%
IDBI Bank Limited	33,070	44,753	73.90%
Indian Bank	7,691	9,865	77.96%
Indian Overseas Bank	23,081	35,098	65.76%
Oriental Bank of Commerce	18,466	22,859	80.78%
Punjab & Sind Bank	4,094	6,298	65.01%
Punjab National Bank	38,441	55,370	69.43%
Syndicate Bank	9,815	17,609	55.74%
UCO Bank	15,216	22,541	67.50%
Union Bank of India	21,357	33,712	63.35%
United Bank of India	7,683	10,952	70.15%
Vijaya Bank	4,914	6,382	77.00%
State Bank of India*	80,079	1,12,343	71.28%