The net non-performing assets (NPA) of Indian banking industry have increased to 1.68 percent of the total loan at the end of financial year13 as against to the 1.28 of total loans in the FY12. Meanwhile, public sector banks recorded steep rise in net NPAs as compared to the private sector banks. Net NPAs of the 26 public sector banks, including State Bank of India (SBI), grew by 2.02 percent during the year as compared to 1.53 in the previous fiscal. SBI and its five associates recorded a net NPA of 2.04 percent against 1.76 percent in the comparable period. Conversely, net NPAs of new private sector bank rose marginally to 0.45 percent as compared to 0.42 percent, showing superior risk management than public sector banks.
The stress on the asset quality is a reflection of the stress in the economy of the country and over the past two years, non-performing Assets (NPAs) of banks have been increasing on account of prevailing economic downturn. Indian economic growth slowed down to four year low at 4.4 percent in Q1 FY14. Meanwhile, in the April- June quarter, 2013, gross NPAs in the banking system grew by 12.02 percent to Rs.2.06 trillion and formed 3.85 percent of the industry’s advances.
At present, banking industry is also concerned over the ongoing tight liquidity situation as it has resulted in increase in cost of funds of all commercial banks to 6.12 percent in FY13 as against 5.90 percent in FY12. For, public sector banks, the cost of funds rose to 6.27 percent from 6.06 percent in 2011-12. Further, increase in cost of funds, has been adversely impacting industry's net interest margin (NIM), which came down to 2.79 percent in FY13 from 2.90 percent a year ago. For the public sector banks, NIM came down to 2.57 percent in the reported fiscal as compared to 2.76 percent in the FY12.
The stress on the asset quality is a reflection of the stress in the economy of the country and over the past two years, non-performing Assets (NPAs) of banks have been increasing on account of prevailing economic downturn. Indian economic growth slowed down to four year low at 4.4 percent in Q1 FY14. Meanwhile, in the April- June quarter, 2013, gross NPAs in the banking system grew by 12.02 percent to Rs.2.06 trillion and formed 3.85 percent of the industry’s advances.
At present, banking industry is also concerned over the ongoing tight liquidity situation as it has resulted in increase in cost of funds of all commercial banks to 6.12 percent in FY13 as against 5.90 percent in FY12. For, public sector banks, the cost of funds rose to 6.27 percent from 6.06 percent in 2011-12. Further, increase in cost of funds, has been adversely impacting industry's net interest margin (NIM), which came down to 2.79 percent in FY13 from 2.90 percent a year ago. For the public sector banks, NIM came down to 2.57 percent in the reported fiscal as compared to 2.76 percent in the FY12.
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