SBI, PNB, other Indian banks see sharp fall in NPAs; these reasons to thank for improved asset quality

India’s largest PSU banks — State bank of India (SBI) and Punjab national bank (PNB) — noticed a major fall in non-performing property within the fiscal’s second quarter. SBI, which accounts for the very best share of PSU Banks’ GNPAs at 20 per cent, reported the very best asset high quality enchancment within the second quarter. Its GNPA ratio fell to five.3 per cent in September 2020, in comparison with 7.2 per cent in the identical month final yr. One other massive PSU financial institution, PNB that accounts for 16 per cent share in total PSU banks’ GNPAs, noticed a fall in NPAs at 13.4 per cent in September 2020, in comparison with 16.8 per cent within the final yr. 

The advance in asset high quality has majorly been because of recoveries and better write-offs by the a number of banks. SBI alone had recoveries to the tune of Rs 4,038 crores and has written off loans price Rs 5,617 crores, in line with Care Ratings. Amongst different PSU banks, NPAs of Financial institution of India fell from 16.31 per cent to 13.79 per cent on yr in Q2; Bank of Maharashtra (16.86 per cent to eight.81 per cent); Indian Overseas Bank (20 per cent to 13.04 per cent); and NPAs fof UCO Bank fell from 21.87 per cent to 11.62 per cent on-year in Q2.

The online NPAs of all banks additionally shrank considerably to Rs 2.1 lakh crores in Q2 FY21 from Rs 4.5 lakh crores in Q2 FY19, reflecting a rise in provision protection ratio (PCR). The combination provision protection ratio of all banks rose to 80 per cent on the finish of Q2, from 68.9 per cent within the earlier yr. The GNPA ratio of scheduled industrial banks additional improved to 7.7 per cent within the quarter ended September 2020, in opposition to 9.3 per cent within the year-ago interval, and eight.2 per cent within the present fiscal’s first quarter, which was largely pushed by PSU banks. 

The combination curiosity earnings recorded a marginal improve of 0.8 per cent throughout Q2 because of subdued credit score offtake, coupled with falling rates of interest. Moreover, the falling deposit rate of interest within the quarter additionally led to a decline in curiosity expense of banks by 8 per cent, in contrast with 9.4 per cent progress within the year-ago interval.

It’s to be famous that the Supreme Court docket has ordered all banks to not classify Covid-19 associated defaults as NPAs till additional discover, or else the NPAs would have been greater within the second quarter. As per disclosures by banks studied by the ranking company, the Gross NPAs would have been round 0.5 – 0.6 per cent greater if these accounts been categorized as NPAs. In the meantime, IDBI Bank and Lakshmi Vilas Financial institution had the very best NPA ratios of round 25 per cent within the second quarter.