RBI’s ‘operation clean-up’ helps PSBs contain bad loans in Q1

NPA-DebtThe launch of “clean-up” operation by RBI Governor Raghuram Rajan has apparently started showing results, as some public sector banks (PSBs) have successfully arrested the growth of bad loans in the first quarter of the current fiscal, ending on June 30, according to a financial analysis.

According to ET Intelligence Group (ETIG), the research arm of The Economic Times, the rising bad loans have been contained after increasing in each of the previous three quarters. If the trend continues over the next few quarters, it could mean that the banks have cleaned up their balance sheets and do not have to provide for NPAs in future, it added.

The median gross non-performing asset ratio (GNPA) for the listed PSBs was 11.01 per cent in Q1 of 2016-17 fiscal. Though it increased by 161 basis points sequentially, the jump in the ratio during the previous quarter was even higher at 235 basis points.

Of the 25 PSBs in the sample, 18 reported a similar trend. A median number for a sample reflects the middle value around which rest of the data is distributed.

However, not all banks are out of the woods. Smaller public sector banks and Bank of Baroda, the third-biggest PSU bank, have shown a sharp increase in bad loans, provisions and losses.  They have shown as much as Rs 50,000 crore loans turning bad in the June quarter.

Elets The Banking and Finance Post Magazine has carved out a niche for itself in the crowded market with exclusive & unique content. Get in-depth insights on trend-setting innovations & transformation in the BFSI sector. Best offers for Print + Digital issues! Subscribe here➔ www.eletsonline.com/subscription/

Get a chance to meet the Who's who of the NBFCs and Insurance industry. Join Us for Upcoming Events and explore business opportunities. Like us on Facebook, connect with us on LinkedIn and follow us on Twitter, Instagram & Pinterest.