Banks’ gross NPAs may rise to 6.9% under severe stress scenario: Finance Ministry

Finance Ministry in its 2015-16 annual Report has said that the gross non-performing assets (GNPAs) of banks could rise to 6.9 per cent by March 2017 in a “severe stress scenario”, the deadline given by Reserve Bank of India (RBI) Governor Raghram Rajan for banks' balance sheet clean-up, if the macro economic conditions deteriorate. The report quoting the RBI report said that the GNPA ratio may rise to 5.4 per cent by September 2016 from 5.1 per cent in September 2015. The Capital to Risk Asset Ratio, an indicator of bank's capital adequacy, could decline to 10.4 per cent by March 2017, from 12.7 per cent as of September 2015.

The report said that the main reasons for increase in NPAs of banks include sluggishness in domestic growth during the recent past, slowdown in recovery in the global economy and continuing uncertainty in the global markets leading to lower exports of various products like textile, engineering goods, leather, and gems. On external factors, it said, ban in mining projects, delay in clearance of projects in power and steel sector, volatility in prices of raw material and shortage of power have impacted operations in infrastructure sectors, which were aggressively funded by the banks in the past, have also resulted in rising NPAs.

Moreover, the report highlighted that the government has taken various steps to contain NPAs such as capital infusion in PSU banks, streamlining the appointment process and changes in laws for faster debt recovery. It said that in order to address the NPA situation, the government has taken sector specific measures in identified areas like road, steel, power and textiles. It is also setting up six new Debt Recovery Tribunals to facilitate recovery of bad loans.