Non-performing assets (NPAs) have been a major cause for concern for public sector banks (PSBs) in India with the recovery rate declining at a steady pace. According to the Reserve Bank of India, almost 90 per cent of NPAs written-off by state-owned banks could not be recovered during the four years ended 2017-18.
According to The Indian Express, in the last four fiscal years the 21 public sector banks could recover only Rs 29,343 crore out of the total Rs 2.72 lakh crore of bad loans, which were written off by the PSBs. The recovery rate was at a paltry 10.77 per cent.
For instance, UCO Bank, which had Rs 6,087 crore at stake, failed to recover even a single rupee between 2014-15 and December 31, 2017.
As a general practice, banks typically write off NPAs for all fully provisioned accounts after four years, even though the process of recovering loans from the borrowers go on.
The Indian Express report said that low recovery rates have been a recent trend. The recovery rate had reached an all-time low of 61.8 per cent in 2009. For the remaining years, the average was at 40 per cent.
While Indian Overseas Bank managed to wrestle back only Rs 10 crore of the Rs 10,470 crore of bad loans that were written off, Allahabad Bank could recover just Rs 257 crore out of Rs 9,533 crore of bad loans. The recovery rate was at just about 2.70 per cent during the four-year period.
The recovery rate for IDBI Bank was at 2.89 per cent, or just Rs 479 crore out of Rs 16,568 crore.
The data further shows that the State Bank of India maintained a recovery rate of 10.13 per cent during this four-year period and managed to pocket an amount of Rs 10,396 crore of the total of Rs 1.02 lakh crore of bad loans that were written off during the same period.
In fact, the recovery rate across 10 public sector banks was below 10 per cent, while the performance of the remaining 11 state-owned lenders was over 10 per cent.
The Syndicate Bank recorded the highest recovery rate of 28.62 per cent, or got back Rs 1,535 crore out of Rs 5,365 crore of bad loans. Canara Bank with 23.34 per cent was at the second spot, followed by Indian Bank with 22.57 per cent and Punjab National Bank clocking 22.54 per cent.
Bad loans in Q4 rise further
Bad loans are expected to surge further by at least Rs 8,000 crore due to the advances to the Gitanjali Gems group and the related scam.
Sources quoted by PTI said banks will have to make provisions for Rs 8,000 crore given to the company alone as there has been "no servicing of the working capital loan during the fourth quarter".
Gross NPAs of all banks touched Rs 8,40,958 crore in December 2017, mostly due to industry loans followed by services and agriculture sectors, as per government data.
Rising NPAs and increasing amount of write-offs are stressing the exchequer to keep feeding capital in the banks to keep them afloat. In January, the Centre had earmarked a large amount of Rs 52,311 crore to 11 weak banks to maintain their minimum regulatory capital requirements.