Tuesday, October 4, 2022

PSBs saw faster-than-expected decline in bad loans, shows EASE Reforms Index

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PW Bureau

Helped by healthy loan recoveries, gross NPA ratio, which was at its peak in March last year, fell for three successive quarters

New Delhi: According to the newly announced first-of-its-kind EASE Reforms Index, bad loans for state-owned banks fell faster than the Reserve Bank of India’s (RBI) expectations. The report said that there was a major improvement in the performance of public sector banks (PSBs) because of the government’s 4R’s strategy. The standard restructured advances as a percentage of gross advances was 7 percent in March 2015 and it has since declined to 0.5 percent at the end of December. With this, stress recognition looks almost complete.

Gross non-performing assets (NPA) ratio, at its peak in March last year, fell for three successive quarters. This was helped by healthy loan recoveries to the extent of Rs 98,493 crore during the first nine months of this fiscal on account of the Insolvency and Bankruptcy Code. Recoveries increased by 103 percent year-on-year.

Following the infusion of Rs 3.19 lakh crore, the balance sheets of nationalised banks also improved, which the government and banks raised from capital markets. Following this, more than eight banks exited RBI’s stringent Prompt Corrective Action (PCA) list.

Fresh slippages also dropped

During the first nine months of this financial year, fresh slippages fell by Rs 58,000 crore, compared to the same period last year.

Set up jointly by the Indian Banks’ Association and BCG with Forrester Inc, the report measured performance on 140 metrics spread across six themes, providing a comparative evaluation of where each bank stands with reference to benchmarks and peers.

The periodic updates, comprising inter-bank comparisons and bank-specific scorecards, allow public sector banks to track progress and continue to drive change by promoting healthy competition among each other.

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