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EXCLUSIVE
BANKS WARM UP TO AT-1 BONDS, SBI MAY FLOAT RS 7,000 CRORE ISSUE
After Canara Bank and Punjab National Bank raised Rs 2,000 crore via perpetual
bonds last month, SBI and Union Bank are readying such issues.
* ETBFSI Research
* ETBFSI
* August 05, 2022, 08:00 IST
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AT-1, or perpetual, bonds, which had gone out of favour after Yes Bank wrote
down the entire value of such bonds two years back, causing losses to investors,
are now back with a bang.
A clutch of public sector banks have raised or are in the process to raise
capital via the instrument.
State Bank of India, India's largest lender, is likely to issue Rs 7,000 crore
of such bonds in a single tranche around the end of August, according to
reports.
Last month, SBI’s board had provided approval for raising up to Rs 11,000 crore
via additional tier-I and tier-II bonds to meet regulatory requirements and
support business growth.
SBI’s capital adequacy ratio was at 13.83 per cent with Tier-I of 11.42 per cent
and Tier-II of 2.41 per cent at end of March 2022.
In December 2021, the bank had raised about Rs 3,974 crore through AT-1 bonds at
a rate of 7.55 per cent. The SBI bonds are likely to be competitively placed
than the recent issues by PSU banks.
Last month, Canara Bank raised Rs 2,000 crore via AT-1 bonds at 8.24 per cent
coupon while Punjab National Bank had raised Rs 2,000 crore at a coupon of 8.75
per cent.
Union Bank of India also plans to raise Rs 1,320 crore next week by issuing
bonds on a private placement basis.
“The unsecured, subordinated, taxable, non-convertible, perpetual, fully paid-up
Basel III compliant additional tier I bonds in the nature of debentures will
carry coupon at 8.69 per cent per annum,” the state-owned lender said in a
regulatory filing.
Despite Yes Bank writing off over Rs 8,000 crore bonds, the AT-1 bonds of PSU
banks are back in favour as lenders have managed to clean up non-performing
assets (NPAs) on their balance sheets and made sufficient provision for bad
assets.
Banks are also looking to take advantage of drop in yields, after they rose to
three-year high, following
As at the end of FY22, the gross NPA ratio of state-run banks stood at 7.6 per
cent compared with 9.5 per cent at the end of FY21.
Banks need to grow Tier-1 capital as credit demand rises. Top-rated banks are
looking at the domestic market to raise funds and interest rates are rising in
the overseas debt markets.
What are AT-1 bonds?
AT-1 bonds are a type of perpetual debt instrument that banks use to augment
their core equity base and thus comply with Basel III norms. These bonds were
introduced by the Basel accord after the global financial crisis to protect
depositors. These bonds do not have a maturity date. Banks have a call option
that permits them to redeem these bonds after a certain period.
Typically, the call option is exercised at the end of a minimum of five years.
However, banks are under no obligation to exercise the call option. In case of
financial trouble, banks can decide against it, which happened in the case of
Yes Bank. In such cases, the capital of the investors can get completely wiped
out. Also, the issuer/lender has the right to call them back and issue them at
cheaper rates when interest rates fall.
However, these bonds are capital instruments and not exactly borrowings and in
case of insolvency proceeding hierarchy, they are behind deposits, borrowings
and Tier II bonds.
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EXCLUSIVE
SBI CHAIRMAN ON DECLINE IN OTHER INCOME, MARGINS & LOAN BOOK GROWTH
“The 10-year G-Sec yield was at 7.45% as on June 30, the day we had finalised
these results. That is one of the reasons for the Rs 6,549 -crore hit which has
been booked. But if we look at the yield movement which we have seen till the
day before yesterday, it has come down to 7.10%. Also, up to 7.45%, any kind of
yield movement was already taken care of.”
* Ankur Mishra
* ET Now
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“In the AFS book, our redemptions are going to be almost about Rs 85,000 crore
and similarly in the HTM book also, the redemptions are going to be about Rs
76,000 crore. So overall, about Rs 1,50,000 crore redemption will happen and
that will be available for supporting the loan growth also,” says Dinesh Kumar
Khara, Chairman, SBI.
What has been the reason for decline of around 80% in other income for SBI this
time?
As far as the 80% decline is concerned, it is essentially coming from the MTM.
It is about Rs 6,549 crore which we have booked and it is a function of
revaluation of the investment book which we hold in the asset available for sale
(AFS) category of the investment book.
This is because the 10-year G-Sec yield was at 7.45% as on June 30, the day we
had finalised these results. That is one of the reasons for this kind of hit
which has been booked. But if we look at the yield movement which we have seen
till the day before yesterday, it has come down to 7.10%. Also, what has to be
kept in mind is that up to 7.45%, any kind of yield movement has already been
taken care of.
Suppose our books had been finalised today and the yield was 7.30%, we would
have been in position to write back about Rs 1,900 crore out of this Rs 6,000
odd crore. That is how the accounting goes by and that is one of the reasons why
optically it looks that we have booked the loss but de facto it is not a loss.
It is only the accounting treatment.
So you mean to say that in the current financial year, these losses can be
recouped?
Oh very much. What we are expecting and even the RBI data suggests is that the
loan book is growing at about 14% and deposit book is growing at 8% for the
system as a whole. This very clearly means that the deposits which we will be
raising will be essentially funding the loan book. So to that extent, it will
not really flow into the investment book and apart from that, we have got a
redemption in the investment book which will take place during the current
financial year itself.
In the AFS book, our redemptions are going to be almost about Rs 85,000 crore
and similarly in the HTM book also, the redemptions are going to be about Rs
76,000 crore. So overall, about Rs 1,50,000 crore redemption will happen and
that will be available for supporting the loan growth also.
As per the RBI norms we can hold up to 23% in the HTM category. As of now, we
can acquire up to Rs 1 lakh crore in the HTM book. That means our ability to
earn better yields is very high. So in a way by providing for this kind of MTM
revaluation, we have insulted the balance sheet from future interest rate shock
also. At the end of September 30, if at all G-Sec yield moves in the range of
about 7.30% or 7.25%, we would be in a position to write back part of this
provision which we have created in this quarter.
If you talk about slippages of around Rs 9,700 crore this quarter, what is your
guidance going forward? Also what are the constituents of the slippages this
time?
Out of this Rs 9,700 crore, almost about Rs 3,000 crore would be in SME and
almost Rs 2,500 crore each into the agri segment and rest would be in mid
corporate group. But out of this, Rs 9,700 crore also, Rs 2,800 crore has
already been recovered. It is something which keeps on fluctuating. I would say
that the way we are following up on the stress book, we should not have much of
a challenge as far as the asset quality is concerned.
You have also clocked around 15% credit growth this time, which is around 1%
above the industry average which is currently prevailing. What do you see as the
rate of growth in the year ahead?
We are hoping to be at least better than the industry and our effort would be to
have at least 15% growth.
Talk to us about corporate books as well. How is the demand on ground? Do you
see corporates availing the limits?
Yes we do see corporates availing the limit. In the first quarter, we had seen
various global headwinds and that is perhaps the reason why we have seen the
under utilisation of the working capital of as high as 49% and non-availment of
the term loan as high as about 26%. But overall, compared to the past, there is
definitely traction and the capacity utilisation in the economy is improving to
75% and the corporates are also depending upon their domestic lending resources.
We are hoping that we will have a decent visibility of the demand from the
corporates as far as the loan book is concerned.
What is your guidance on net interest margin in the current financial year? You
have clocked a YoY increase but there is some decline on a sequential basis?
For NIM, sequential is perhaps not the right indicator because as in March,
there are always one-offs which are not a true representative of the various
other quarters. So, for the NIM purposes the better indicator would be year on
year. That shows NIM has improved by almost about 8 basis points. So, from that
point of view, our effort will be to retain domestic NIM somewhere in the range
of 3.2-3.25%.
You have a capital adequacy ratio of 13.43% with a target of growth which you
are keeping for yourself in the current financial year. Do you think this
capital will be enough and you already have a board approval of around Rs 11,000
crore for the current financial year. Do you see actually raising capital this
financial year?
Hopefully we should be in a position to take care of our growth requirements
with this fresh bond issuances of 81 and 82 of 11,000 crore but we will be very
closely watching the situation and if at all required at any point of time, we
will take the right call. However, the board has already given us the approval
for raising Rs 11,000 crore through 81 and 82.
For Yes Bank, there is already a mandate of keeping 26% till the current
financial year. Now since that embargo will be lifted in March 2023 and in the
current deal which has been announced by Yes Bank, it has to go down below 26%
after those warrants are redeemed. What is the decision which has been taken at
the bank level?
As of now the matter has not been deliberated at the board level of the bank and
so I am unable to really comment. But yes, of course, as per the current
mandate, we are required to hold 26% till March 23 and that stays as it is.
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EXCLUSIVE
CANARA BANK HIKES FD INTEREST RATES: NOW EARN UP TO 6% ON THIS TENURE
After the Reserve Bank of India (RBI) increased the repo rate by 50 bps at the
August MPC meeting, Canara Bank boosted the interest rates on term or fixed
deposits for balances under Rs 2 crore.
* Sneha Kulkarni
* ET Online
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Canara Bank has increased the interest rates on term or fixed deposits for
amounts below Rs 2 crore after the Reserve Bank of India (RBI) raised the repo
rate by 50 bps at the August MPC meeting.
According to the Canara Bank official website, the higher interest rates on
fixed deposits are effective from August 8, 2022.
Canara Bank FDs come in tenures ranging from 7 days to 10 years which will now
earn interest rates from 2.90% to 5.75% for the general public and 2.90% to
6.25% for senior citizens as a result of the modification.
The bank raised the 180-day to 269-day term interest rate by 15 basis points to
4.65 percent. Canara Bank increased the interest rate on fixed rate deposits
from 4.55 percent to 4.65 percent for terms ranging from 270 days to less than
one year. The bank raised the one-year interest rate by 20 basis points to 5.50
percent. For terms of more than one year to less than two years, there is a 15
basis point increase to 5.55 percent.
Penalty
Domestic deposits worth less than Rs. 2 crore that are prematurely closed,
partially withdrawn, or extended will incur a 1% penalty. However, no interest
will be payable on term deposits prematurely closed or prematurely extended
before the completion of the 7th day.
According to the Canara Bank website, "For premature closure/part
withdrawal/premature extension of Domestic/NRO term deposits, the Bank imposes a
penalty of 1.00%. Such prematurely closed/part withdrawn/prematurely extended
deposits will earn interest at 1.00% below the rate as applicable for the
relevant amount slab as ruling on the date of deposit and as applicable for the
period run OR 1.00% below the rate at which the deposit has been accepted,
whichever is lower."
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EXCLUSIVE
BANK OF INDIA HIKES HOME LOAN INTEREST RATES
During its MPC meeting on Friday, the Reserve Bank of India (RBI) increased the
repo rate by 50 basis points to 5.40 percent.
* Sneha Kulkarni
* ET Online
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The Reserve Bank of India (RBI) raised the repo rate by 50 basis points to 5.40
percent on Friday during its MPC meeting. Following this, many banks hiked their
lending rates with immediate effect, including ICICI Bank, Bank of Baroda, and
Bank of India. This indicates that the interest rates on home loans and other
associated loans would increase for many borrowers.
Bank of India hiked RBLR (Repo Based Lending Rate), with effect from August 5,
2022, to 8.25 percent as per the revised repo rate (5.40%). Earlier, Bank of
India RBLR was 7.75 percent.
According to the Bank of India website, “The effective RBLR w.e.f from
05/08/2022 is 8.25% as per the revised Repo rate (5.40%).”
Impact of RLLR on loans
Any change in the repo rate has an impact on the banks' lending rates because
banks borrow money from the RBI at the repo rate.
As a result, if a person chooses an RLLR house loan, his interest rates will
rise or fall in accordance with fluctuations in the repo rate.
Bank of India MCLR
With effect from August 1, 2022, Bank of India increased its marginal cost of
funds-based lending rate (MCLR) by 10 basis points (bps). The EMI payments for
debtors servicing loans under the MCLR regime would increase as a result of this
adjustment.
The change increased the one-year MCLR from 7.50 to 7.60 percent. The overnight,
one-month, and three-month MCLRs have been raised by 10 basis points, bringing
them to 6. The six-month and 3-year MCLR has been raised to 7.45 and 7.80
percent, respectively.
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EXCLUSIVE
JAPAN TECH GIANT SOFTBANK POSTS $23 BILLION QUARTERLY LOSS
SoftBank Group Corp.’s loss of 3.16 trillion yen was a reversal from its 762
billion yen profit in the same quarter a year earlier. Quarterly sales rose 6%
to 1.57 trillion yen ($11.6 billion).
* AP
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TOKYO : Japanese technology company SoftBank Group posted a $23.4 billion loss
in the April-June quarter as the value of its investments sank amid global
worries about inflation and interest rates.
SoftBank Group Corp.’s loss of 3.16 trillion yen was a reversal from its 762
billion yen profit in the same quarter a year earlier. Quarterly sales rose 6%
to 1.57 trillion yen ($11.6 billion).
“I must humbly and honestly acknowledge that things are really bad,” a somber
Chief Executive Masayoshi Son told reporters Monday. “I must face up to this."
Losses for the last six months totaled about 5 trillion yen ($37 billion), and
the latest red ink was the worst quarterly loss since the company's founding, he
said.
For the fiscal year that ended in March, Softbank racked up losses of 1.7
trillion yen ($13 billion), a reversal from the 4.9 trillion yen profit for the
previous year. Annual sales grew 10.5% to 6.2 trillion yen ($46 billion).
Although Softbank’s portfolio is not directly exposed to the war in Ukraine, the
company warned that global uncertainty as well as inflation and soaring energy
costs would likely hurt its profitability.
Much of the dip of the value in shares came from a drop in price of Chinese
e-commerce giant Alibaba, in which SoftBank is a major investor. The declining
value of the yen also hurt Tokyo-based SoftBank's bottom line because its
borrowings must be repaid in yen.
How long the problems will persist is unclear, Son said, noting it could be
months or even years because of global instability and inflation.
Softbank’s intended sale of British semiconductor and software design company
Arm to Nvidia failed earlier this year. SoftBank is now promising lucrative
future growth at Arm, including an initial public offering, although a date has
not been announced for that offering.
SoftBank acquired Arm in 2016. Arm is a leader in artificial intelligence, IoT,
cloud, the metaverse and autonomous driving. Its semiconductor design is widely
licensed and used in virtually all smartphones, the majority of tablets and
digital TVs. Such technology is considered key for autonomous driving cars.
Though Arm remains a bit of a positive for SoftBank, Son said he was not going
to gloss over the overwhelmingly devastating results for the latest quarter.
Lower share prices might appear to be an opportunity to buy at bargain basement
prices, but Son promised SoftBank will firmly hold back on new investments, cut
costs and jobs, and instead focus on the more than 470 companies it's already
invested in, mostly companies focused on artificial intelligence.
He declined to say how many jobs were being reduced.
SoftBank also owns stakes in the SoftBank mobile carrier, Yahoo web services
provider and vehicle-for-hire company Didi, which has suffered under a
regulatory crackdown in China. SoftBank also has funds that include other global
investors called Vision Funds.
Son stressed he still believes in the potential of the Vision Fund investments.
“We believe this is a source of future great wealth,” he said. “But we don't
really know for sure until it happens.”
He said some of the companies were exciting and may benefit humankind, but if
dreams are pursued too recklessly, sometimes there is a risk of annihilation.
“And we must avoid annihilation at all costs,” said Son.
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EXCLUSIVE
FINCARE SMALL FINANCE BANK FILES DRHP WITH SEBI
The bank plans to raise funds via its Initial Public Offering through issue of
equity share capital of face value ₹ 10 each comprising of fresh issue
aggregating upto ₹ 625 crore.
* ETBFSI
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Fincare Small Finance Bank (SFB) announced the filing of the Draft Red Herring
prospectus with the market regulator Security Exchange Board of India (SEBI) on
Monday.
The SFB plans to raise funds via its Initial Public Offering (IPO) through the
issue of the equity share capital of face value ₹ 10 each comprising fresh
issues aggregating up to ₹ 625 crores and Offer For Sale aggregating up to
17,000,000 equity shares by Promoter and Investor Selling shareholders.
The bank proposes to utilize the net proceeds of the fresh issue towards
augmentation of Bank’s Tier-I capital base to meet its Bank’s future capital
requirements, which are expected to arise out of growth in its Bank’s assets,
primarily the Bank’s loans/advances and investment portfolio and to ensure
compliance with regulatory requirements on capital adequacy prescribed by the
RBI from time to time.
ICICI Securities Limited, Axis Capital Limited, IIFL Securities Limited, SBI
Capital Markets Limited, and Ambit Private Limited are the Book Running Lead
Managers.
The offer of equity shares comprises up to 14,934,779 equity shares by Fincare
Business Services Limited.
Fincare Small Finance Bank Limited is a "digital-first" SFB with a focus on
unbanked and under-banked customer segments, especially in rural and semi-urban
areas.
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EXCLUSIVE
UCO PLANS TO TAP ARC TO HANDLE ITS EXPOSURE IN SREI
UCO Bank is toying with the possibility to tap an asset reconstruction company
(ARC), including the government-backed bad loan aggregator National Asset
Reconstruction Company, to handle its exposure in ailing Srei group entities,
which are going through a resolution process under the
* TNN
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KOLKATA: UCO Bank is toying with the possibility to tap an asset reconstruction
company (ARC), including the government-backed bad loan aggregator National
Asset Reconstruction Company, to handle its exposure in ailing Srei group
entities, which are going through a resolution process under the Insolvency and
Bankruptcy Code (IBC).
According to Soma Sankara Prasad, MD & CEO, UCO Bank, if any ARC is interested
in Srei then banks could get their money upfront instead of having to wait for
the resolution process to be complete.
“We have the joint lenders’ meeting this Monday and we will check with other
lenders in the consortium what they think about it (going to an ARC). This is
one option that we can explore. If any of the ARCs is interested in Srei then we
can get cash upfront immediately,” Prasad said while addressing the press on
Friday.
The Kolkata bench of NCLT had on October 8 given its approval to start
insolvency proceedings against the Srei group companies, including Srei
Equipment Finance (SEFL) and Srei Infrastructure Finance (SIFL).
The lenders to the two insolvent Srei firms had recently extended the deadline
for submitting resolution plans by 10 days to August 10 following request from
three of the prospective bidders. The deadline earlier was July 30. This is the
third time that the deadline has been extended.
Big corporates, including Vedanta and Jindal Power and asset reconstruction
companies such as Assets Care and Reconstruction Enterprise, JM Financial Asset
Reconstruction Company and Asset Reconstruction Company (India) (ARCIL) are some
of the names that feature in the provisional list of eligible prospective
resolution applicants for the Srei Group companies.
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EXCLUSIVE
IDFC FIRST BANK REVISES SAVINGS ACCOUNT INTEREST RATES
IDFC First Bank has updated its savings account interest rates, effective July
20, 2022. IDFC First Bank customers will see their savings account interest
computed in a progressive manner.
* Sneha Kulkarni
* ET Online
Click Here to Read This Story
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IDFC First Bank has revised interest rates on its savings accounts, with effect
from July 20, 2022. Interest on savings accounts will be calculated in a
progressive manner for IDFC First Bank customers.
According to the bank website, for savings account balances up to Rs 10 lakh the
interest rate that can be earned is 4 percent. Those with savings account
balances between Rs 10 lakh to Rs 25 crore, the interest rate will be 6 percent.
For balances above Rs 25 crore to 100 crore the savings account will fetch an
interest rate of 5 percent. While, Rs 100 Cr to less than 200 Cr will earn 4.50
percent. For above 200 crore, the interest rate it offers is 3.50 percent.
How IDFC First savings account interest rates are calculated
According to the IDFC First Bank website, interest will be calculated on
progressive balances in each Interest Rate Slab, as applicable.
For Example:
1. In case your account balance with us is Rs. 25,000, the interest payable to
you will be 4% on the entire Rs. 25,000.
2. In case your account balance with us is Rs. 5 lacs, the interest payable to
you will be 4% on Rs. 5 lacs.
3. In case your account balance with us is Rs. 1.10 crores, the interest payable
to you will be 4% on Rs. 10 lacs, 6% on Rs. 1 crore.
4. In case your account balance with us is Rs. 5.3 crores, the interest payable
to you will be 4% on Rs. 10 lacs, 6% on Rs. 5.2 crore.
Please note that interest rates are subject to periodic change.
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EXCLUSIVE
HDFC BANK INCREASES MCLR ON LOANS BY UP TO 10 BASIS POINTS
The private sector lender HDFC Bank has raised its marginal cost of funds-based
lending rate (MCLR) on loans of all maturities by up to 10 basis points (100
basis points = 1 percent).
* Sneha Kulkarni
* ET Online
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Private sector lender HDFC Bank has increased its marginal cost of funds-based
lending rate (MCLR) on loans across all tenures by up to 10 basis points (100
basis points = 1%). The new loan rates will be effective from August 8, 2022.
As a result, borrowers will witness an increase in the equivalent monthly
instalments (EMI) for various loan types, which will increase the cost of
housing, vehicles, personal, and other loans, once the reset date of the loan
arrives.
According to the HDFC Bank website, the overnight MCLR is now 7.80 percent, up
from 7.70 percent a hike of 10 bps. The MCLR for one month is 7.80percent. The
three-month and six-month MCLRs will be 7.85 percent and 7.95 percent,
respectively. The one-year MCLR, which is connected to many consumer loans, will
now be 8.10 percent, the two-year MCLR will be 8.20percent, and the three-year
MCLR will be 8.30 percent.
Last month, HDFC Bank had raised MCLR by 20 basis points (w.e.f July 7, 2022)
and 35 basis points (w.e.f June 7, 2022).
On the reset date, the bank will raise the interest rate on your mortgage in
accordance with the current MCLR. Your interest rate will therefore rise in
August if the reset date of your loan is in August, and it is tied to the MCLR
rate.
RBI hikes repo rate
In its policy review on Friday, the Reserve Bank of India increased the repo
rate, the primary policy rate, by 50 basis points.
In May, the RBI increased the repo rate by 40 basis points. The RBI also
increased the repo rate by 50 basis points each time it reviewed the monetary
policy in June and August. Due to rising inflation, the central bank has been
raising rates aggressively. Around the previous six months, retail inflation has
remained persistently high at over 6%.
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EXCLUSIVE
NARCL INTERESTED IN TAKING OVER LOAN ACCOUNTS OF DEBT-RIDDEN SREI: OFFICIAL
The development comes at the time when the resolution is at an advanced stage,
and financial bids are expected to be submitted latest by August 10 for taking
over debt-ridden Srei Infrastructure Finance Ltd (SIFL) and Srei Equipment
Finance Ltd (SEFL).
* PTI
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The National Asset Reconstruction Co Ltd (NARCL) has evinced interest in the
loan accounts of Srei group companies, which are undergoing corporate insolvency
resolution process, a top official of a state-owned bank said. The development
comes at the time when the resolution is at an advanced stage, and financial
bids are expected to be submitted latest by August 10 for taking over
debt-ridden Srei Infrastructure Finance Ltd (SIFL) and Srei Equipment Finance
Ltd (SEFL).
"We have received preliminary interest from NARCL on taking over the Srei
account. We will discuss this at the joint lenders' meeting on August 8," UCO
Bank MD & CEO Soma Shankara Prasad said.
The total liabilities of Srei stood at around Rs 32,000 crore from all sources,
including banks, debentures and external commercial borrowing, officials said.
The company has made cash recovery and upgradation of NPA accounts worth nearly
Rs 5,000 crore since an RBI-appointed administrator started looking into the
affairs of the crisis-ridden firms, they said.
"There will be no impact on the ongoing IBC-led resolution process even if
existing lenders/banks assign or sell out loans to any other institution,
including asset reconstruction companies (ARCs)," Srei board administrator
Rajneesh Sharma, who is also the resolution professional, told PTI.
Srei officials said the total resolution amount is likely to be around Rs 10,000
crore.
There were originally 14 suitors who had submitted expressions of interest to
acquire Srei group companies under the Insolvency and Bankruptcy Code (IBC) in
March.
But, now only overseas bidders - New York-based Arena Investors LP Ltd, Varde
Investment's affiliate VFSI Holdings and Shon Randhawa and his partners - are
expected to participate in the financial bidding.
The Reserve Bank of India had in early October last year superseded the boards
of SIFL and its wholly-owned subsidiary SEFL.
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EXCLUSIVE
PUBLIC SECTOR BANKS RECOVER ₹6.4L CR NPAS, WRITTEN-OFF LOANS SINCE FY15
The provision coverage ratio of the PSBs, a measure of health that captures
amounts set aside to cover bad loans, has improved to 86.9% at the end of March
2022 from 46% at the end of March 2015. The state-run banks have recovered ₹5.17
lakh crore in non-performing assets (NPAs) and ₹1.24 lakh crore in written-off
accounts since FY15.
* ET Bureau
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The public sector banks (PSBs) have recovered ₹6.42 lakh crore of non-performing
loans and written-off loans since FY15 and filed suits against 98.5% of wilful
defaulters, data available with the government showed.
Over FY16 to FY21, the government has infused ₹3.36 lakh crore of capital in
PSBs while the banks themselves have raised an additional ₹2.99 lakh crore from
the markets.
The provision coverage ratio of the PSBs, a measure of health that captures
amounts set aside to cover bad loans, has improved to 86.9% at the end of March
2022 from 46% at the end of March 2015.
The state-run banks have recovered ₹5.17 lakh crore in non-performing assets
(NPAs) and ₹1.24 lakh crore in written-off accounts since FY15.
The gross NPA ratio of PSBs has fallen from 14.6% on March 31, 2018, to 7.4% on
March 31, 2022, while the net NPA ratio declined from 8% to 2% over this period.
Stressed assets are down from 15.3% to 8.7%.
"Banks continue to pursue recovery actions initiated in written-off accounts
through various recovery mechanisms available," a senior government official
said.
These include recovery suits in civil courts or Debts Recovery Tribunals, action
under the Securitisation and Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002, cases in the National Company Law Tribunal under
the Insolvency and Bankruptcy Code, 2016, or through negotiated
settlement/compromise, and through the sale of NPAs.
The occurrence of fraud as a proportion of the gross advances of PSBs dropped
from a peak of 1.32% during the financial year 2013-14 to 0.05% during the
financial year 2021-22.
"The improved detection and reporting accompanied with the comprehensive steps
taken to check frauds have resulted in a decline in the occurrence of such
frauds," the above-quoted official added.
Out of 12,265 designated wilful defaulters as of March 31, 2022, suits have been
filed against 12,076 (98.5%), FIRs have been lodged against 40.2% and SARFAESI
action initiated against 75.5%
"The government has further provided a conducive business environment and
healthy competition which has encouraged private sector banks to flourish in the
country," the official said pointing to the fall in the share of PSBs in gross
advances from 74.29% in 2014-15 to 58.34% in 2021-22.
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