Fri, 23rd June 2017

Anirudh Sethi Report


Archives of “non performing assets” Tag

RBI cautions lenders on bad debt

The Reserve Bank of India (RBI) Monday said it has cautioned lenders on the need to improve asset quality and curtail non-performing assets (NPAs) which have increased in the recent past. 

Speaking to reporters here, RBI’s Deputy Governor R. Gandhi said asset quality has always been a concern following the global financial crisis.  

“We have been continuously cautioning banks about slippage of stressed assets and we have been guiding banks in recovering,” Gandhi said. 

The prolonged and steep economic downturn, accompanied by high interest rates, has led to a sharp deterioration in asset quality for the banking sector and increased the pressure of NPAs. 

The percentage of gross non-performing assets (GNPAs) for the banking sector is expected to worsen from 3.9 percent of advances in fiscal 2013-14 to about 4-4.2 percent in 2014-15, Moody’s analyst ICRA has said in a report. 

Crisil sees banks’ restructured assets at Rs 4 Lakh Crore by FY14-end

warningSounding an alarm of the detoriating asset quality of banks, ratings agency CrisilBSE -0.49 % has said gross non-performing assets will touch 4.4 per cent and the restructured book will balloon to Rs 4 lakh crore by the end of this fiscal. 

“Gross NPAs (non-performing assets) were at 3.3 per cent in March 2013 and grew to 3.7 per cent by the June quarter. We feel they will grow to 4.4 per cent by March 2014,” CRISIL Managing Director and Chief Executive Roopa Kudva said here over the weekend. 

An NPA is a debt obligation where the borrower has not paid the interest and principal repayments to the lender for an extended period of time. Corporate Debt Restructuring (CDR) allows the reorganisation of a company’s outstanding obligations. 

Kudva said restructured assets, under which an account’s repayment period is extended or interest payment delayed without classifying it as an NPA, will touch Rs 4 lakh crore this fiscal, up from the Rs 3.1 lakh crore in March, 2013. 

“The system will add up to Rs 1 trillion (lakh crore) of restructured assets during the fiscal and considering some assets will be reclassified during the fiscal, we feel the total component will touch Rs 4 trillion by March 2014,” Kudva said.  Read More 

Man-Mohan Singh says rupee fall is part of needed adjustment

Speech to parliament :

  • but says its “a matter of concern”
  • expects rupee decline to be positively reflected in exports in coming months
  • says India must reduce its appettite for gold and consumption of oil
  • rupee fall caused by large current account deficit and other domestic factors
  • govt will take all possible steps to keep c/a below $70 bln
  • not contemplating capital controls
  • govt will do more to improve economic fundamentals
  • will contain fiscal deficit  at 4.8% in 2014
  • depreciation in rupee will put upward pressure on inflation
  • fundamentals of Indian economy remain strong
  • banks are well capitalized to pay for non-performing assets
  • there may be short term shocks to the economy which must be faced

That would appear to be all

Quite how he intends to curb gold and oil imports to improve c/a he doesn’t say

Perhaps our Indian readers can shed some light?

NPAs of banks could rise on account of slowing economy: PMEAC

Prime Minister’s key economic advisor C Rangarajan today indicated banks may have to deal with higher non performing assets (NPAs) on account of poor economic performance.

“NPA also increases because of the way economy behaves. If rise in bad loan is beyond control of banks, then banks need to be very careful in identifying NPAs,” Rangarajan said.

He was speaking at the 5th Conference of Central Bureau of Investigation (CBI) officials and Central Vigilance Officials (CVO’s) of Public Sector Banks.

“While judging increasing NPAs, banks should also take note of what is happening in the environment. Some amount of loan can for a time become NPA,” Rangarajan added.

Non-performing Assets (NPAs) of banks have been going up for the last two years due to slowdown in the economy. The gross NPAs of some public sector banks, including State Bank of India and Punjab National Bank have crossed 4 per cent of the total assets at the end of March, 2013. Read More 

CBI opens probe into firms defaulting on public sector bank loans

These business houses secured huge loans from the banks after the 2008 financial crisis, but either defaulted or escaped by restructuring the loans

Big business houses that secured huge loans from public sector banks post-2008 financial crisis, but defaulted on repayments or charted an escape route through multiple restructuring of bad loans, have now come under the Central Bureau of Investigation’s scanner for suspected wilful misappropriation of public money, running into thousands of crores.

“An inquiry has been initiated into the public sector bank loan non-performing assets (NPAs) to understand the magnitude of the problem, which basically concerns the Finance Ministry. Big business houses have in the past procured loans worth thousands of crores and it is suspected that in several cases they have either defaulted or got the loans restructured, resulting in further delay in loan recovery by the financial institutions. Whether it amounted to wilful misappropriation leading to embezzlement of public money has to be enquired into,” a senior CBI official told 

The official said the agency’s banking division had already started an internal inquiry. “It is only after we get to know the magnitude of the issue that we can zero in on specific business houses to ascertain their role in bank debt non-recovery. Sadly, we have noticed that the bleeding banks, due to various reasons, do not usually come forward to lodge complaints seeking a probe. This exercise will throw light on the irregularities, if any, in the process of loan grant and non-recovery/restructuring,” he added. Read More 

Bad loans hit PSU Banks’ earnings

Gross NPAs of 40-listed Indian banks rose to Rs.1.8 trillion, up 36%, from Rs.1.3 trillion in the year-ago periodMera Bharat Mahan-ASR

Loans turning bad, a fallout of the slowing Indian economy, continue to hurt the earnings of state-run banks.

On Thursday, Bank of Baroda (BoB) and Union Bank of India, posted modest earnings for the quarter ended 30 June, hit by rising bad loans. Expansion in earnings was largely aided by growth in treasury income.
BoB posted a marginal 2.5% rise in net profit in the first quarter at Rs.1,167.87 crore compared withRs.1,138.86 crore a year ago. Total provisions, which include that on bad loans, rose to Rs.1,017.86 crore from Rs.893.80 crore. Gross non-performing assets (NPAs) widened to 2.99% from 1.84% and 2.4% in March quarter.
Revenue generated from treasury operations rose to Rs.3,099.91 crore from Rs.2,030.98 crore in the year-ago quarter. The bank expects asset quality to improve in the quarter beginning December, according to chairman and managing director S.S. Mundra. “For the fiscal year 2014, we expect to maintain the gross NPAs below 3%,” Mundra said.
Union Bank posted a 9.5% increase in net profit to Rs.560 crore from Rs.512 crore in the year-ago quarter. Gross NPAs stood at 3.5% in the June quarter from 2.98% in the March quarter.
The bank generated a revenue of Rs.2,095.5 crore in the June quarter compared with Rs.1,474.5 crore a year ago quarter. Total provisions rose to Rs.681.55 crore from Rs.518.47 crore in the year-ago quarter. “Considering recent macro developments in a weak economic environment, we believe that asset quality stress is unlikely to abate as quickly as was anticipated earlier,” said Angel’s Agrawal. Slippages of Union Bank during the quarter stood at Rs.1,468 crore from Rs.1,631 crore in the year-ago period.
Non-interest income rose to Rs.756 crore, up 64%, from Rs.491 crore in the in the same quarter last year Read More 

GNPA of 11 PSU Banks-Up by 46.8%

The June quarter earnings of state-owned banks have confirmed the worst fears of investors. Asset quality problems continue to persist, not surprising given the wheezing economy.

The 11 state-owned banks that have declared their earnings so far have seen their combined gross non-performing assets jump 46.8% from a year ago. While that number might pale in comparison with the 65%-plus increase in bad loans in some quarters of the previous fiscal year, note that the increase in the June quarter is from an already large base.
What’s more, the nine private banks that have declared their earnings so far have reported a 22.13% jump in bad loans, the highest pace in at least three years. Given that they are perceived to have more prudent lending practices (largely because no finance ministry mandarin is breathing down their necks), it is yet another indicator of worsening macro fundamentals. Read More 

CRISIL cuts FY14 GDP growth estimate to 5.5%

Crisil sounds the debt knell for India Inc; numerous downgrades likelyRatings agency CRISIL has lowered its estimate for growth in India’s gross domestic product (GDP) for 2013-14 to 5.5 per cent from its previous estimate of six per cent.

The industry and services sector are expected to grow at a lower rate of 3.5 per cent and 6.9 per cent, respectively. The forecast for agricultural GDP growth is, however, unchanged at 3.5 per cent, CRISIL said.

The agency added the Reserve Bank of India (RBI)’s steps to tighten liquidity would adversely impact car, truck and home sales. It would also reduce volume growth for steel and cement companies, according to CRISIL data.

The steps, which would push lending rates up, might badly hit the debt repayment capacity of companies, which are already facing adverse economic and business climates.

This would raise the incidence of defaults and increase non-performing assets of banks to four per cent by March 2014, up from 3.3 per cent in March this year.

The agency expects refinancing to be a challenge for companies due to tighter cash conditions, which could prompt more rating downgrades than upgrades in the near term.

“The liquidity squeeze has changed our outlook on change in the rating cycle. The companies would face refinancing or rollover challenges due to tight cash conditions,” said Rope Kudva, managing director and chief executive, CRISIL. Read More 

Bank loan recasts top Rs. 2.5 trillion

Indian banks have cumulatively restructured more than Rs.2.5 trillion of loans under a popular mechanism created by the central bank in 2005, with a significant portion of this being done in recent quarters and years—an indication of rash bets taken by borrowers and accommodating lending rules followed by lenders in the earlier easy money regime and the impact of the economic slowdown.

According to two officials of the corporate debt restructuring (CDR) cell who did not want to be identified, the Rs.2.5 trillion milestone was crossed in June.
India’s slowing economy, which grew at a 10-year-low of 5% in the fiscal year ended March, continues to affect the ability of companies to repay money borrowed from banks, forcing many lenders to restructure the loans in an effort to prevent them from turning bad. Banks have to set aside (or provision) more money for bad loans (or non-performing assets) than restructured ones.
Experts say that companies have also been hit by delays in government approvals for projects. Read More 

Jun quarter corp earnings may be one of worst in 3 yrs: Assocham

June quarter corporate earnings are likely to go down as one of the worst in the last three years with companies in automobile, realty, road and airport infrastructure, capital goods and engineeringsectors expected to see significant pressure, according to a survey.

“With the economy under stress, corporates across a large number of sectors are set to report significant drop in their top line sales and net earnings in the first quarter of the current fiscal ending June, 2013,” the CFO survey conducted by industry body Assocham said.

As per the survey, as many as 81% of the 131 CFOs covered in the survey indicated that corporates in these segments would report bad earnings during April-June FY’14.

“The first quarter of the fiscal 2013-14 is likely to go down as one of the worst in the last three years with the situations deteriorating fast rather than improving,” it said.

High interest rates, shrinking margins in the wake of huge pressure on sales, rising cost of raw materials and inability to raise fresh resources are among the biggest challenges being grappled with the Chief Finance Officers (CFOs), survey said.

The situation is likely to persist in the second quarter of the current fiscal as well, it added. Read More