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- Bad loans have seen a sharp rise over the last three years
Bad loans have seen a sharp rise over the last three years
Bank results for the September quarter have shown a sharp rise in NPAs for most public sector banks. However, much of the increase is on account of a shift to a system-based NPA recognition. Private sector banks did rather well on the NPA front, thanks to their retail assets.
The impact of the high level of bad loans is felt on banks’ profits via higher loan loss provisions. How high could these go? According to Nomura Research, “In the current credit cost cycle, we expect loan loss provisions for the Indian banking sector to increase from 72 bps (basis points) in FY11 to 119 bps in FY12F and 123 bps in FY13F—due to credit quality deterioration in sectors like power, aviation, SME (small and medium enterprises), etc. This compares with the past peaks of 156 bps in FY97 and 119 bps in FY04.” One basis point is one-hundredth of a percentage point.CommentQuote0Flag
- Big borrowers of India Inc default on Rs 47,000 crore loans
Re-posting the message from other forum
Big borrowers of India Inc default on Rs 47,000 crore loans
Data available with the finance ministry shows that least 700 defaulters who had borrowed Rs 10 crore or more from public sector banks and cumulatively owe over Rs 26,000 crore have gone scot free despite not clearing their dues. In another 3,400 cases where loans are of the order of Rs 1 crore or more, the lenders have moved courts and tribunals to recover Rs 21,400 crore.
Is this is a part of NPA?CommentQuote0Flag
- Are banks flirting with the risk of credit default?
Are banks flirting with the risk of credit default?
Five year CDS of Mumbai-based ICICI Bank has jumped 76 basis points in the past month to 471 basis points, the biggest advance in the region. On the other hand swaps of SBI have hit a two-year high of 397 basis points.
Banks are borrowing at an average of Rs 74,500 crore per day from the central bank this quarter as compared to an average of Rs 43,800 crore in the previous quarter. As a result overnight bank rates have moved up by 315 basis points to 8.65 percent.CommentQuote0Flag