AIBEA releases name of top 50 loan defaulters
Demands remedy for increasing bad loans
All India Bank Employees' Association (AIBEA) has announced a list of top 50 loan defaulters, mainly the corporate firms, whose total default amount to the banks is allegedly to be around Rs 40,528 crore. The association demanded a remedy for the bad loans at the earliest to safeguard the public money in the banks.
The association has earlier announced its plans to observe December 5, 2013, as All India Day, demanding a remedy for the increasing bad loans, alleging that the alarming increase in bad loans in the Public Sector Banks (PSBs) is due to the big and corporate borrowers.
Releasing the names of the top loan defaulters today, the association said, “Since the RBI or the Government is not publishing the list of loan defaulters, AIBEA will shortly publish a Booklet containing the names of the top 30 defaulters in each Bank... Since bad loans and write off is a loot of public money, we seek the support of the people in our campaign to safeguard the public money in the Banks.”
The list, released by the association, is on the data on loan not paid from Public Sector Banks except State Bank of India, IDBI and foreign banks. C H Venkatachalam, general secretary, AIBEA said that the information from the banks excluded now would be later.
The bad loans in PSBs has increased from Rs 39,000 crore in March 2008 to Rs 1,64,000 crore in March 2013 and the bad loans restructured and shown as good loans accounts to Rs 3,25,000 crore. Of the restructured loans, Rs 2,70,000 crore was in favour of corporate borrowers.
“If we include the bad loans in the private banks and foreign banks and other financial institutions, the total bad loans are more than Rs 2,50,000 crore,” said a leaflet issued by AIBEA earlier.
It has raised six demands - to publish the list of bank loan defaulters of Rs 1 crore and above, make willful default of bank loan a criminal offence, order investigation to probe nexus and collusion, amend recovery laws to speed up recovery of bad loans and take stringent measures to recover bad loans. It also demanded not to incentivise corporate delinquency.
The provisions made for bad loans from the profits earned by the Banks has been growing and it has show a growth from Rs 11,121 crore in 2008-09 to Rs 43,102 crore in 2012-13, accounting to a total of Rs 1,40,266 crore as provisioning in the five years.
In a period between 2008 and 2013, the banks' gross profit before provisions for bad loans was at Rs 3,58,893 crore, of which the provisions made for bad loans was Rs 1,40,266 crore leaving the banks with net profit of Rs 2,18,627 crore.
Meanwhile, the provision coverage ratio has been falling, making the banks more vulnerable and susceptible to risks against loan losses and as compared to the provision coverage ratio of 68 per cent as on March 31, 2012, it has reduced to 62 per cent by March 31, 2013.
"According to RBI, the ratio in the entire banking system has fallen from 55 per cent to 45 per cent while the global average ratio is 70 to 80 per cent," it said.
Bad loans of PSBs may swell to 5% by March 2014: ICRA
State-owned banks may report 30-40% fall in net profit for FY14
Rating agency ICRA today said that the long spell of slowdown could further weaken the financial profile of public sector banks by end of March 2014. Facing high incidence of corporate defaults and stretched working capital cycles, the gross non-performing assets (NPAs) of state-owned banks may reach 4.8-5% (of advances) by end of March 2014, agency said.
The gross NPAs of PSBs stood at 4.5% at end of September.
Vibha Batra, senior vice president at ICRA said, besides rising portfolio of stressed assets, the capacity for making provisions of NPAs (credit provisions) is also going to be under pressure.
The PSBs’ high levels of Net NPAs (around 2.7%) and fresh slippages (3.5-3.75%) are likely to keep their core profitability under pressure. At the same time, unamortised (that is not provided for) MTM losses could prove to be an additional drag on overall profits in the second half.
The state-owned banks have a larger bearing on the banking system’s NPAs and they could rise further to 4.2-4.4% as on March 31, 2014 from 4.0% as on September 30, 2013.
The profitability will be under severe strain due to lower net interest margins, lower fee based income and higher credit provisions and depreciation on fixed income investments. ICRA expects profit after tax of PSB’s could fall by 30-40% for FY 2014 from FY 2013 levels. This is likely to translate into a drop in return on equity to 6-8% from 9.7% in H1, FY2014 for the PSBs. However, any increase in base rate by PSBs could offset the pressure on their profitability to some extent, ICRA said.
The NIMs (adjusted for credit provisions) for state-owned banks hit 10-year low during first half (April-September) of FY14, impacting their core profitability significantly. Given the large NPAs, the PSBs had to set aside half their core operating profits for credit provisions in H1, FY2014 as against just 20-25% around two years back. Despite this, the provisioning cover dropped from 45.3% as in March 2013 to 41.6% as in September 2013.
Going forward, the credit provisions are unlikely to reduce, given the high level of Net NPAs (2.7% as of September 2013) and the high fresh NPA generation rate (around 3.6% in Q2, FY2014). This in turn would keep the PSBs’ core profitability under pressure.
The gross NPAs of PSBs stood at 4.5% at end of September.
Vibha Batra, senior vice president at ICRA said, besides rising portfolio of stressed assets, the capacity for making provisions of NPAs (credit provisions) is also going to be under pressure.
The PSBs’ high levels of Net NPAs (around 2.7%) and fresh slippages (3.5-3.75%) are likely to keep their core profitability under pressure. At the same time, unamortised (that is not provided for) MTM losses could prove to be an additional drag on overall profits in the second half.
The state-owned banks have a larger bearing on the banking system’s NPAs and they could rise further to 4.2-4.4% as on March 31, 2014 from 4.0% as on September 30, 2013.
The profitability will be under severe strain due to lower net interest margins, lower fee based income and higher credit provisions and depreciation on fixed income investments. ICRA expects profit after tax of PSB’s could fall by 30-40% for FY 2014 from FY 2013 levels. This is likely to translate into a drop in return on equity to 6-8% from 9.7% in H1, FY2014 for the PSBs. However, any increase in base rate by PSBs could offset the pressure on their profitability to some extent, ICRA said.
The NIMs (adjusted for credit provisions) for state-owned banks hit 10-year low during first half (April-September) of FY14, impacting their core profitability significantly. Given the large NPAs, the PSBs had to set aside half their core operating profits for credit provisions in H1, FY2014 as against just 20-25% around two years back. Despite this, the provisioning cover dropped from 45.3% as in March 2013 to 41.6% as in September 2013.
Going forward, the credit provisions are unlikely to reduce, given the high level of Net NPAs (2.7% as of September 2013) and the high fresh NPA generation rate (around 3.6% in Q2, FY2014). This in turn would keep the PSBs’ core profitability under pressure.
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