PSBs look successful in arresting bad loan growth

PSBs

Nine months after RBI Governor Raghuram Rajan launched his operation ‘clean-up’, some of the public sector banks (PSBs) seems to have succeeded in arresting the growth in bad loans in the June 2016 quarter sequentially after increasing in each of the previous three-quarters, an ETIG analysis shows. If the trend continues over the next few quarters, it could mean that the banks have cleaned up their balance sheets and don’t have to provide for NPAs in future.
The median gross non-performing asset ratio (GNPA) for the listed PSBs was 11.01% in the quarter ended June 2016. Though it increased by 161 basis points sequentially, the jump in the ratio during the previous quarter was even higher at 235 basis points. Of the 25 PSBs in the sample, 18 reported a similar trend. A median number for a sample reflects the middle value around which rest of the data is distributed.
However, not all banks  are out of the woods. Smaller public sector banks and Bank of Baroda, the third-biggest PSU bank, have shown a sharp increase in bad loans, provisions and losses.  They have shown as much as Rs 50,000 crore loans turning bad in the June quarter.
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