-------------------------------------------------------------------------- | Wishing all Goanetters | | a Prosperous | | and | | Happy New Year - 2006 | | Goanet - http://www.goanet.org | -------------------------------------------------------------------------- Banks' bad loans, other sticky assets touch Rs 2,36,000 crore Newindpress.com Thursday January 5 2006 00:00 IST
MUMBAI: The total funds stuck in the Indian banking system in terms of bad loans, write-offs and restructured assets have touched an alarming high of Rs 2,36,000 crore, according to Asset Reconstruction Company of India (Arcil) data. The money stuck in the Indian banking system is enough to fund 200 world-class airports in the country or fund the entire Golden Quadrilateral highway project by four times. During last three fiscal years, new NPAs amounted to Rs 66,000 crore whereas non-performing assets (NPAs) of over Rs 77,000 crore were written off, the Arcil says. By writing off the loans, the banks take out bad loans from their balance-sheet and as and when the funds are recovered, it is added to the banks' profitability. Of the written-off accounts, around 50 percent will be in AUCA (assets under collection accounts) having potential for value realisation. ''If we add 50 percent of the AUCA figures to the NPA level of Rs 2,03,000 crore, the same will increase to Rs 2,36,000 crore... this will account for 16.3 percent of GDP,'' says Arcil. As NPAs in the financial system are large in dimension, it requires on-going steps to unlock their values. Restructured assets (Rs 92,000 crore) and NPAs of all scheduled commercial banks, financial institutions, non-banking finance companies and co-operative banks (Rs 1,11,000 crore) put together are Rs 2,03,000 crore. This is nearly 14 percent of the GDP at current factor cost, Arcil says. Arcil has been floated by a clutch of banks to recover bad loans. However, according to bankers, restructured assets are not classified as NPAs. ''In most of the restructured cases, there're interest waivers and moratorium on repayment. So the repayment can be delayed by 6-12 years,'' clarified a PSU bank official. This means a bank usually forsakes its profits so that its principle amount can come back to its kitty. Further, implementation of BASEL II norms from 2007 and 100 percent provisioning on doubtful assets over three years from March 2007 are likely to further increase volume of NPAs. ''The present buoyancy of the economy provides an opportune time for recovering realisable value from the sizable NPAs,'' Arcil claims. Banks have restructured Rs 27,000 crore standard assets which do not figure as NPAs. Beside, Rs 65,000 crore debts have been restructured through CDR. ''Experience suggests that some of these restructured loans (Rs 92,000 crore) are likely to turn into NPAs,'' Arcil says. Restructured assets and NPAs as stated above add up to Rs 2,03,000 crore. The GDP at current factor cost as of September 2005 is Rs 14,49,000 crore. Thus restructured accounts and NPAs comprise 14 percent of the GDP at current factor cost. Not only that, NPAs erode shareholders value significantly. During last three fiscal years banks have booked a PAT of Rs 60,000 crore and provided Rs 43,000 crore as provision for NPAs. ''Substantial portion of the profit of the banks is eaten away by NPAs. Thus, shareholders' value is getting eroded on account of NPAs,'' it says. Though the government of India came out with legislation on making recovery of bad loans easier, the banks are resorting more to write-offs than to recover funds from big industrial houses. -------------------------------------------------------------------------- | Goa - 2005 Santosh Trophy Champions | | | | Support Soccer Activities at the grassroots in our villages | | Vacationing in Goa this year-end - Carry and distribute Soccer Balls | --------------------------------------------------------------------------
