Indian banks make headway in denting bad debt in Q3

The growth of gross NPAs fell to 8.4% from 30.4% the previous year.

Banks in India made progress in resolving their massive bad loan problem as the growth of non-performing assets (NPAs) slowed to 8.4% in Q3FY19 from 30.4% the previous year, according to CARE Ratings.

“The NPA situation in the Indian banking system has been stabilising as can be seen in Q3 FY19,” the firm said in a report. “Another quarter of moderation in growth of NPAs could indicate that the recognition cycle is over.”

Overall, the NPA ratio of the Indian banking sector edged down to 10.04% in Q3FY19 from 10.23% although it cautioned that it remains to be seen whether banks have recognised all legacy NPAs.

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Public sector banks (PSB) continue to hold more than thrice the amount of soured assets than their private counterparts in Q3 as the former’s NPA ratio hit 13.09% compared to the latter’s 4.16%.

As banks tuck the worst of their bad loan woes away, credit has started picking up in Q3 to the benefit of the economy with personal loans registering double-digit growth. Interest income also grew 14.4% from 7.3% amidst higher weighted average lending rates.

Bank earnings, however, remained under pressure with PSBs seeing earnings of RS392 crore during the quarter whilst private banks saw profit growth slow to 3% in Q3FY19 from 12%.