Non-performing assets continued to weigh on the profitability of banks which reported a dip in the January-June period due to higher provisioning for NPA’s.
Eighty-five per cent (all PSU banks) of the 20 banks surveyed by FICCI-IBA for their study, reported increasing levels of non-performing assets. A majority of the banks said that implementation of Insolvency and Bankruptcy code will help in debt recovery. Despite the loss in profitability however, a majority (56 per cent) of the participating banks in the latest round of survey reported increase in long-term credit especially in the infrastructure sectors like power, road, and telecom and in industries like real estate and food processing sectors.
The majority of the banks, 56 per cent had lent to corporates, and 42 per cent to retail. Earlier the figures were 62 per cent for corporates and 38 per cent for retail.
The increase in relative share of retail loans, the study says, indicates the increased focus of banks towards the retail portfolio.Sixty per cent of the total portfolio of these 20 banks, went as loans and advances followed by 30 per cent to be kept in the form of government securities as statutory liquidity ratio (SLR) requirements at a rate decided by the RBI. (According to CARE ratings chief economist Madan Sabnavis banks presently carry an excess of 6 per cent as SLR on their books.)
Regarding beefing up the capital of Indian banks to meet the BASEL III requirements, majority of participating banks expect that along with capital infusion the government should dilute its equity in Public Sector Banks upto 51 per cent.