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NPAs of banking industry could rise due to slowing economy: C Rangarajan

22 Aug 2013 Evaluate

As per the Prime Minister's key economic advisor C Rangarajan, Indian banking industry may have to deal with higher non-performing assets (NPAs) on account of poor economic performance. While addressing an event, Rangarajan said that NPA increases in the economic slowdown scenario and if rise in bad loan is beyond control of banks, then they have to be very careful in identifying NPAs and should also take note of what is happening in the current economic environment.

The stress on the asset quality is a reflection of the stress in the economy of the country and over the past two years, non-performing Assets (NPAs) of banks have been going up due to slowdown in the economy. In the June quarter, gross NPAs in the banking system grew by 12.02% to Rs.2.06 trillion and formed 3.85% of the industry’s advances. In banking industry, public sector sector banks remained the worst performers as gross non-performing assets (NPA) of public sector banks rose to Rs 1.76 lakh crore in the April-June quarter of 2013-14 from Rs 1.55 lakh crore at March 31, 2013. Gross bad assets of PSU bank-Central Bank of India exceeded 6% of its advances in the June quarter.

On the other hand, Indian economy is struggling with slowdown owing to the poor performance of farm, manufacturing and mining sectors. India’s GDP growth slowed down to a decade low of 5% in the previous fiscal.

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