Gross NPA of Banks may Increase this Year: Care Edge Ratings

 

Indian banks' asset quality has greatly improved in recent years.  This indicates a decrease in the quantity of loans that are not being repaid, also referred to as non-performing assets, or NPAs.  Higher bank write-offs, improved recoveries, and fewer new bad loans were the primary drivers of this improvement in the banking industry.

 However, experts predict that things could get a little worse as we enter the fiscal year 2025–2026 (FY26).  This is due to the fact that some loan kinds, particularly microfinance and unsecured personal loans, are growing riskier.  These are unsecured loans, and the bank will have a difficult time getting the money back if the borrower defaults.

In the past, banks had to cope with a large number of bad loans as a result of large corporate loans going bad, particularly between 2014 and 2018. The Gross Non-Performing Asset (GNPA) ratio increased from 3.8% in 2014 to 11.2% in 2018 as a result of these loans.

This compelled banks to write down several loans and make huge provisions—money set up to cover losses. Banks began making more retail loans to individuals rather than big businesses in order to prevent such circumstances in the future. Retail loans' percentage rose from 19% in 2015 to 34% in 2025 as a result of this change.

The entire GNPA ratio decreased to 2.3% by the end of FY25, which is encouraging.  However, there is still worry, particularly in banks in the private sector.  These banks are increasingly exhibiting indications of stress as they offer more credit card loans, personal loans, and other unsecured loans.

 As a result, private banks have had more slippages (new non-performing assets) than public sector banks.  It is anticipated that the amount of money recovered from previous bad loans will decline and the number of new bad loans will rise marginally in FY26.  As a result, the GNPA ratio may marginally increase to between 2.3% and 2.4%.

The agriculture industry has performed better when compared to other sectors.  In March 2020, its GNPA ratio was 10.1%; by December 2024, it had dropped to 6.2%.  A significant improvement has also been observed in the industrial sector, which fell from 14.1% in March 2020 to just 2.7% in December 2024.

 Despite having a low GNPA of 1.2%, retail loans—including credit card bills, student loans, and personal loans—are predicted to experience increased stress in FY26 as a result of an increase in unsecured loan delinquencies.  In December 2024, the GNPA ratio for loans to the services sector was 2.3%.

The growing amount of household debt in India, which was 42.1% of GDP as of December 2024, is one major worry. This has been rising gradually, but it is still less than other emerging markets. A large number of low-income or sub-prime borrowers have taken out loans primarily for consumption, such purchasing electronics or handling daily bills.

The likelihood of these debtors defaulting is higher. Conversely, wealthy borrowers have utilized loans to build assets such as homes. Banks may expect an increase in non-performing assets (NPAs) from unsecured loans as stress on these loans rises, particularly in the first half of FY26.

Banks temporarily altered the terms of a large number of loans during the COVID-19 pandemic.  The term "restructured standard assets" was used to describe these.  These loans are becoming less common since they are either repaid or become non-performing assets.

 In general, there are fewer stressed loans overall (bad loans including restructured loans).  With ratios ranging from 75% to 80%, public sector banks have taken the initiative to create robust financial cushions, often known as provision coverage.  At roughly 74%, private sector banks likewise have respectable provision coverage.

Source - hellobanker.in

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Useful tips to recover bad loans/NPA Acs

1.Every branch should maintain a master file having the lists of eligible star sanjeenvani accounts for the year, monthly sascal and NPA borrowers. The Lists should be sorted village wise. While going for recovery, our focus should not to cover many villages, rather to cover a single village and meet with each and every single account of that village coming under the three lists.

2. Ensure to get the mobile phone number of the borrower immediately. If the borrower is not available, then get their family members contact numbers.  Please make a note if there is any landmark near the borrower’s residence. Ensure to update these details in Finacle DC for future purposes.

3.Whosoever is going for recovery, always carry with yourself the below set of things – Mobile number updating forms , L444C or any other loan renewal document , OTS offer letter , Cash deposit and withdrawal challans. This comes easy to deal with borrowers.

4. What I believe that there is no use of visiting the same customer again and again , Identify and try to read his mind during the first visit only  that what type of customer he is and what’s the way to handle him in future like follow up through phone only , regular visits , settlement ,any legal action etc.

5. Whatever is the promises and dates of borrowers, note their words , take their signature and after returning to the branch, update the same in the master file so that whosoever is the next person going for recovery, has some baseline. Also try to know what will be the source of repayment according to the customer. If it is karkhana or any other person, try to contact them also.

6.Whosoever is going for recovery, avoid going inside the house and ensure that the communication should be outside the house only so that the passers and neighborhoods see that the bankers visited that particular household. Some borrowers are very sensitive about their images.

7. At least in a week, use Hacs menu and figure out the credit balances present in the saving account of NPA accounts. Transfer the balances immediately and reduce the NPA figures of your branch.

8. Also on daily basis, before proceeding for day end have a look at the cash vouchers and check if there any recovery in NPA account and parked in the office account . If it is so, immediately appropriate it to the account and reduce the NPA figures of your branch.

9. If at some day you feel that today Karkhana is releasing sugar payments or employees will get salary today and possibly customer can withdraw money from ATM, then at frequent intervals run menu – LADSP (LOAN DEMAND SATISFACTION PROCESS) . This will satisfy the demand raised in the loan account from the saving account of the customer and no need for waiting till day end.

10. As soon as you receive the first sascal list from the controlling office , address the technical sascal first as it will bring down the figures of your list and of course ,lesser will be the pages of sascal, lesser will be our tension.

11. Always understand Time value of money, There are many cases where we unnecessarily wait to get more money and later we lose that money also what we were previously getting. It’s the need of the hour that we cannot wait and increase the age of NPA unnecessarily. Always remember, A stitch in time saves nine.

12.  You can only exercise your power when you know what is your power ?  Modified NPA management policy and Liberal OTS schemes are now available. Be decisive, get the thorough study and utilize it fully.

13. I understand that it’s extremely difficult to initiate legal action for every NPA account. But at least Pick 2,3 strong cases and start the legal action. If it is Sarfaesi , immediately go for 13(2) , pre possession and drag it till the day of paper publication and E auction. Let there will be a fear created amongst the borrowers that we bankers can do everything when it comes to saving our mother institution. If every branch will do at least 2,3 such cases , many NPA borrowers will upgrade their account due to fear . Also publicize your action in such a manner that it will reach in the ear of each and every NPA borrower. Do less Sing more.

14.  Education loan students are very image conscious. When we go to their residence for recovery, often they will be at some other place for job. Try to take out the details of their job and company. After returning, spare some 10-15 minutes and try to figure out the company’s profile by using the social networking. If possible, try to contact them through their official email ids.It will create a fear in them of losing the job as these companies are very conscious of their images .

15. There are many customers of the branches who require regular visits and they wait till the last day and every time they come in sascal, intimate them that whatever the cost involved in the regular visits, bank will recover them from their loan account as follow up charges. Make a note of their visits,take their signature and if possible, recover them also in some cases as follow up/notice charges.

16. At last I would like to say that recovery is a long continuous effort. *Focus should be on recovery not on reporting* . Most of the times , efforts for the day will bear fruits in the next week and possibly credit goes to the person who will visit the borrower on that day . But that should not bother us. After all we all work for the same purpose.

Source-Blog reader

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BoB, PNB among 6 PSU banks with high NPAs

Non Performing asset (NPA) is a loan or advance for which the principal or interest payment has remained overdue for a period of 90 days or more. According to data from Trendlyne, SBI, Bank of Baroda, and PNB are among the 6 PSU banks that reported the highest NPAs in Q3 of FY24. Here's the list:

Bank of India(BoI)

The net NPA of Bank of India stood at 1.41% in Q3FY24, which is the highest among PSU Banks. The PE ratio of the stock is 9.66. Bank of India has a market cap of Rs 61,870 crore.

Union bank of India

Union Bank of India reported a net NPA of 1.08% in Q3FY24. The PE ratio of the stock is 7.74. The firm's market cap is at Rs 1,02,773 crore.

Punjab National Bank (PNB)

Punjab National Bank (PNB) reported a net NPA of 0.96% in Q3FY24. The PE ratio of the stock is at 17.76. Punjab National Bank's market cap is at Rs 1,35,490 crore.

Bank of Baroda(BoB)

The net NPA ratio of Bank of Baroda stood at 0.7% in the December quarter of FY24. The PE ratio of the stock is 7.3. It has a market cap of Rs 1,38,153 crore.

State Bank of India (SBI) 

The net NPA ratio of the State Bank of India (SBI) stood at 0.64% in Q3FY24. The PE ratio of the stock is 10.26. SBI has a market cap of Rs 6,65,731 crore.

Indian Overseas Bank(IOB)

Indian Overseas Bank reported a net NPA of 0.62% in the December quarter of FY24. The PE ratio of the stock is at 50.36, while its market cap is at Rs 1,26,457 crore.

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This PSU Banks classified its loans of Rs 2,000 crore to Go First as NPA

 

Central Bank of India classified its loans to Go First as non-performing assets (NPAs) in the July-September quarter (second quarter, or Q2) of 2023-24 (FY24). The no-frills carrier has been under insolvency proceedings since May 2023 and ceased operating flights on May 3 this year.

The public sector lender’s exposure, including government-guaranteed emergency credit to the ailing airline, amounts to about Rs 2,000 crore.

Apart from Central Bank of India, another state-owned lender, Bank of Baroda, also has substantial exposure to Go First.

During an analyst call for Q2, Central Bank of India executives revealed that the bank had previously made provisions in the standard asset category for one big corporate account (Go First) due to anticipated issues (stress) in the future. With the corporate account now classified as NPA, the provision led to a write-back, resulting in a 100 per cent provision on that account.

In the April-June quarter of FY24, the bank paid tax on the provision (over Rs 600 crore) for this account, treating it as a standard asset. Now, with the provision amounting to nearly Rs 2,000 crore as an NPA, the bank experienced a write-back of Rs 43 crore, as disclosed by bank executives.

While the bank did not specify the exact extent of recovery expected from this account, executives stated that the account was sufficiently collateralised. They expressed confidence in the possibility of a successful recovery effort. Any recovery made will contribute to the bank’s bottom line, the executives said during the analyst call.

According to provisioning rules, this account is categorised as a sub-standard account, indicating that it has remained non-performing for less than or equal to 12 months.

Although the provisioning obligation for sub-standard accounts can be up to 25 per cent of the exposure, depending on the nature of the credit facility, Central Bank of India chose to make a full provision for airline accounts.

A bank executive said, “The bank aims to reduce net NPAs and improve overall asset quality profile, hence the provision made exceeds the requirement.”

Of the Rs 2,000 crore exposure, over Rs 600 crore is covered under the Emergency Credit Line Guarantee Scheme by the Government of India. The National Credit Guarantee Trustee Company, a government-owned entity, administers the scheme, providing emergency loan facilities to companies and micro, small and medium enterprises affected during the pandemic. The lender will file claims based on the prospects for resolution and recovery from proceedings under the Insolvency and Bankruptcy Code, 2016.

In recent developments, Naveen Jindal-led Jindal Power and Jettwings Airways, a Guwahati-based regional airline, have submitted expressions of interest for Go First.

Despite efforts by the resolution professional at Go First to revive the airline with limited flights, securing funding from lenders has proven challenging due to ongoing legal cases filed by the aircraft’s lessors.

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This PSB is going to auction actor Sunny Deol's Juhu property to recover loan

Public sector lender Bank of Baroda (BoB) has issued a notice to Bollywood actor Sunny Deol for auctioning his villa in Mumbai’s Juhu citing non-payment of dues amounting to nearly Rs 56 crore.

In a notice published in a national newspaper on August 19, 2023, BoB said the villa will be e-auctioned on September 25 due to non-payment. As per the notice, Deol, whose real name is Ajay Singh Deol, is the borrower and guarantor of the loan and has allegedly failed to pay the amount to the bank on time.

According to the rules, a loan becomes a non-performing asset (NPA) if there is no repayment of interest and principal for a period of 90 days. Banks need to set aside money to cover likely losses from such loans and they typically auction such properties to recover the amount.

"The loan was taken for the purpose of film financing in 2016, and it is an NPA since last year December 2022," said a person familiar with the matter speaking on condition of anonymity.

An email sent to BoB for official response did not elicit any response till the time of filing this copy. Moneycontrol couldn’t immediately reach out to Deols for a comment.

The development comes in the backdrop of a recent mega release of Deol’s movie. ”Gadar 2”, starring him and Ameesha Patel, which has crossed Rs 300 crore mark at the domestic box office on August 19.

Directed by Anil Sharma, the film is a sequel to the 2001 blockbuster ”Gadar: Ek Prem Katha”. The movie, a Zee Studios production, released in theatres on August 11. In a press note, the makers claimed the film has ”soared to a remarkable all-time high for any Hindi film”, especially in territories like Punjab.

In response to a query, Sunny Deol's representative said "We are in process of resolving this issue and the issue will be resolved. We request for no further speculation on the same."

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Non-performing advances of public sector banks at multi-year lows

The non-performing advances (NPAs) of banks are at multi-year lows, supported by substantial write-offs, especially for state-owned banks. 

The overall loan write-offs by public sector banks (PSBs) exceeded Rs 10 trillion during the FY2017-2023 period. 

This followed the banking industry-wide asset quality review the Reserve Bank of India (RBI) initiated in FY16. The closing stock of write-off pool stood at Rs 7.5 trillion at the end of March 2023, up from Rs 6.8 trillion a year ago. 

The recoveries from this pool are expected to continue to contribute significantly to the profita­bility of PSBs even in a scenario of low recoveries.  

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5 Indian banks with the lowest NPAs

Growing NPAs (non performing assets) have become an unending nightmare for the Indian banking sector due to the pandemic.While some banks have implemented measures to mitigate this, others may be at the beginning of a new NPA cycle.Although there is no ‘acceptable limit’ for NPAs, it’s considered manageable if the bank’s NPAs are under 3%.

Here are 5 Indian banks with the lowest NPAs.

#1 HDFC Bank

HDFC Bank is India's largest private sector bank by assets and by market capitalisation.The bank, despite having less than 10% share of the banking sector, is one of the most respected banks in the country.When it comes to servicing retail customers, the bank relies on the model of wide franchise and low-cost deposit base. This ensures good pricing power and sustainability of above average NIMs (net interest margins).

That sourcing home loans for parent HDFC is a huge advantage for the bank cannot be undermined. But even otherwise being extremely conservative with margins and provisioning policies has been very rewarding.

It thus comes as no surprise to us that HDFC Bank holds the distinction of reporting more than 20% YoY profit growth every quarter for over 40 quarters. All this while, its net NPAs have never crossed 0.5% of loans!

Even in the year 2020, where the entire banking industry was hit due to the pandemic, HDFC Bank reached out to large corporates for their funding requirements, which it could do because of its strong balance sheet.

In its latest quarterly results, the bank’s net NPA ratio stood at 0.48%.

Its bad-loan write-offs doubled to Rs.31 bn from Rs.15 bn in the June 2020 quarter. It also offloaded its non-performing assets (NPAs) amounting to Rs.18 bn to maintain a robust asset quality profile.

#2 IndusInd Bank

Another private sector bank, which has come a long way, and has a strong resemblance to HDFC Bank in the past few years is IndusInd Bank.The bank was incorporated around the same as HDFC Bank, in 1994, by Srichand Hinduja, one of the promoters of the Hinduja group.It was not until 2008, when Romesh Sobti along with some of his colleagues at ABN Amro NV, took over the reins of IndusInd bank, that the entity gained some vigour.Despite above average loan growth, even in the most difficult of times, IndusInd Bank has not compromised on its asset quality.The bank's net NPA ratio, like in the case of HDFC Bank, has consistently stayed below 0.5% over the past five years.

The bank also has a leadership position in certain retail asset classes with a pan India franchise which has strengthened its ability to manage the asset quality in those segments.

In its latest quarterly results, the bank’s gross non-performing assets (GNPAs) stood at 2.88% as it was impacted by the second wave of Covid-19 while the net NPA ratio rose 15 basis points sequentially to 0.84%.

However, the impact of the same was mitigated by the fact that the bank carries unutilised provisions of Rs.20.5 bn (not a part of the provision coverage) that can be utilised in case it sees further slippages.

#3 Kotak Bank

Third on the list is Kotak Mahindra Bank.

The bank is the third largest Indian private sector bank by market capitalisation. It offers products and financial services for corporate and retail customers in the areas of personal finance, investment banking, life insurance, and wealth management.Over the last couple of years, Kotak Mahindra Bank has demonstrated a highly consistent and healthy historical track record.

The bank has sustained net NPAs below 1.5% of its loan book all these years. Its institutional memory of tiding over one credit crisis after the other for nearly 25 years has also served it well.

The bank’s loan book has grown at a CAGR of over 25% over the past decade. This has been supported by a healthy contribution of low-cost deposits (current and savings accounts).In its latest quarterly results, the bank’s asset quality weakened as gross NPAs stood at 3.56%. However, net NPAs still came in below 1.5% at 1.28%.The bank’s Covid-19 related provisions stand at Rs.12.8 bn in accordance with the Resolution Framework for Covid-19 and MSME announced by RBI. It has also implemented a total restructuring of Rs.5.5 bn as of 30 June 2021.

#4 Federal Bank

Federal Bank (FBL) is another private sector bank with robust asset quality.

The bank is headquartered in Kerala and handles more than 15% of India’s total inward remittances.It has a customer base of over 10 m, including 1.5 m NRI customers and a large network of remittance partners across the world.

The bank constantly improves its collection and recovery architecture to improve its asset quality. It also uses various analytics tools to predict the propensity to default and collection score of the borrowers.

During the financial year 2021, while there was large increase in NPAs in almost all banks, Federal Bank exhibited a decline in NPAs due to diligent selection of borrowers.

Its slippage ratio also came in at 1.6%, lower than 1.7% in 2020 and the management has guided further similar slippage ratio for FY22, in line with its historical trend.

In the latest quarterly results, the bank’s gross NPAs rose to 3.5% while its net NPAs increased marginally to 1.23% largely due to the Covid-19 related challenges faced by borrowers.

However, the bank has reasonably provided for the Covid-19 related impact in 2021 and the June 2021 quarter for restructuring and the subsequent rise in delinquencies.

#5 ICICI Bank

ICICI Bank is one of the three systemically important banks in India with a 7% market share in the banking sector.

Along with its subsidiaries, the bank has a wide presence across various financial services verticals such as life insurance, general insurance, merchant banking, asset management, etc, with a leadership position in many of these businesses.

The bank’s net NPAs have stayed around 2% in the last decade with an exception in the years 2017 and 2018 where it saw high additions to NPAs in its corporate and small and medium enterprises loan portfolio.

With the onset of Covid-19 during 2021, the bank did see an impact on asset quality across segments, resulting in an uptick in the overall fresh NPAs.

However, despite a rise in slippages, the net NPAs remained lower at 1.14% as on 31 March 2021 against 1.54% as on 31 March 2020.

The bank has also changed its provisioning policy on non-performing assets for certain loan categories to make it more conservative resulting in higher provisions.

In its latest quarterly results, the bank reported a net NPA ratio of 1.16%.

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Punjab & Sind Bank declares Sintex Industries account as Defaulter

 

State-owned Punjab & Sind Bank on Thursday said it has declared the account of Sintex Industries with the total outstanding of Rs 294 crore as fraud and reported the same to the RBI.

With regard to the bank's policy on determination and disclosures of material events, it is informed that an NPA account Sintex Industries Ltd with outstanding dues of Rs 294.49 crore has been declared as fraud, the Bank said in a regulatory filing.

The lender said it has made provisioning of Rs 147.25 crore against this fraud account.

It has been reported to the Reserve Bank of India (RBI) today as per regulatory requirement, Punjab & Sind Bank said.

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