The Dragon Named: Un-disclosed NPAs in Public Sector Banks

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Business Mantra: Faridabad

There are small facts about NPAs:

  • NPA (Non Performing Assets) or the Bad Loans are surging at a very high rate in Banks, especially in Public Sector Banks.
  • Gross NPAs in PSBs      :                       March 2015  2.67 Lac Crores

                                                     :                       Dec. 2015     Rs. 3.61Lac Crores

  • NPA figure of PSBs are so high i.e. 1.5 times the total market capitalization of PSBs.
  • RBI Governor has said, “A deep surgery is required to clean PSBs Balance Sheets”. RBI has given a deadline of March, 2017 for declaring all hidden NPA accounts.

Analysis of RBI Governor’s Statement:

  1. It means that PSBs have shown or classified some of their NPA accounts as standard assets or in simple words, they have not disclosed or declared such accounts as NPA.
  2. The number of such undisclosed NPA accounts and total amount of these accounts seem to be very high i.e. much more higher than the amount disclosed as NPA by PSBs in December, 2015 (Rs.3.61 Lac Crores)
  3. As RBI Governor says a deep surgery is required and moreover deadline (March, 2017) has been given to declare all those accounts as NPA, but shown as standard in December, 2015. December, 2015 figure Rs.3.61 Lac Crores is much higher(almost 150%) of the total market capitalization of PSBs and its undisclosed NPA figure are much more than the disclosed NPA. It shows that undisclosed NPA shall prove to be a dragon which would gobble the PSBs, as their capital is nearly eroded.

Due to this announcement, banks have started declaring NPAs and a steep rise of almost 150% has been observed in Gross NPA figure of the PSBs:

NPA

Figures

March, 2015 December, 2015
Rs. 2.67 Lac Crores Rs.3.61 Lac Crores

 In almost all Banks, March, 2016 Balance Sheet finalization and Audits are in process. Seeing the result of few banks, it is expected that NPA figure of March, 2016 will again show a very steep jump as compared to December, 2015.

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