Bad loans at India’s listed banks rose at the slowest pace in eight quarters, suggesting that the toughest phase of the bank balance sheet clean-up may be behind us.
Data compiled by BloombergQuint, based on quarterly earnings of banks, shows that gross non-performing assets of listed banks rose to Rs 8.4 lakh crore, compared to Rs 8.29 lakh crore in the previous quarter. The 1.3 percent quarter-on-quarter increase is the slowest since the asset quality review began in the September 2015 quarter.
The Reserve Bank of India had conducted the review as it feared that stressed assets were being under-reported. What followed was an increase in the reported gross NPAs across both public sector and private sector banks.
Between the September 2015 and September 2017 quarters, gross NPAs have surged from Rs 3.4 lakh crore to Rs 8.4 lakh crore, shows the analysis.
The data for the September 2015 quarter does not include IDFC Bank, since it started reporting as a listed entity from the December 2015 quarter. For State Bank of India, consolidated numbers have been taken starting March 2017 following a merger with its associate banks.
While the data suggests that the rate of increase in gross NPAs may have flattened out, risks remain. Over the next two quarters, some banks may add to gross NPAs once the regulator communicates the divergence in bad loan assessment for financial year 2017.
In the September 2017 quarter, Axis Bank Ltd. reported a divergence of Rs 5,633 crore. Other lenders like ICICI Bank Ltd. and SBI have said they are awaiting communication from the regulator.
Accounts which have been restructured under various schemes, such as Strategic Debt Restructuring, could also add to the bad loan pile if resolution does not take place in time. In an interview to BloombergQuint on Monday, Ashish Gupta, head of research at Credit Suisse, said that about 5 percent of total banking system loans are stressed but still not recognised as bad loans.