Banks reporting spike in NPAs, declining credit growth

ANI | Updated: Jan 25, 2018 15:49 IST

New Delhi [India], Jan 25 (ANI): A FICCI-IBA Survey has noted that banks are reporting an increase in non-performing assets (NPAs), lower restructuring of loans and a slow pace of growth in bank credit.

As per the survey, bankers have suggested specific measures that may be announced in the upcoming Union Budget to facilitate credit growth and investment pick-up in the economy. They recommend accelerated investments in infrastructure sector as well as interest subvention for investments in long gestation infrastructure projects.

Most of the responding banks have suggested reduction in corporate tax rate from 30 to 25 percent, lowering of Minimum Alternate Tax (MAT) rate to 15 percent and enhancing tax deductions and exemptions for individuals. This should boost credit demand at both corporate and retail level.

As regards the banking sector, the respondent banks suggested that in the upcoming Union Budget, the government should allow full tax deduction on the NPA provisioning as against the cap of 5 percent of taxable income. They have also suggested greater incentives for promoting digital transactions for merchants and users, as well as creation of dedicated fund for digital payments infrastructure in the upcoming Union Budget.

With the surge in digital transactions over the last one year, banks suggested improvement in data security infrastructure and widening the reach of digital platforms to all strata of the society, in a bid to further incentivize digital payment.

The survey findings revealed that banking sector performance during July-December2017 period remains more or less similar to the previous six months on the parameters studied. Nearly 67 percent of the participating banks have maintained their credit standards for large as well as small enterprises. Out of the few who have tightened credit for large enterprises have cited rise in NPAs or a risk of the asset turning into NPA as the main reason for their action.

The share of corporate to retail loans also remains the same at 56:44 as noted in the previous round of the survey. Likewise, the ratio of advances to investments (SLR and non-SLR) at 66:34 also remains nearly same as in the previous round (68:32).

58 percent of the respondent banks reported a rise in NPAs, significantly lower than 80 percent reporting so in the previous round of the survey indicating possible stability in credit environment. Infrastructure, metals and engineering goods were the key sectors reported with the highest NPAs. However, only 28 percent banks reported a rise in the number of requests for restructuring of loans as compared to 40 percent in the previous round.

Banks were also asked for their views and suggestions on improving the ease of doing business ranking with respect to credit. Banks have suggested various measures like setting up of single window regulatory/statutory approvals for a fresh venture/ exposure, strengthening up of online loan applications platform and speedy credit underwriting process, and introduction of Legal Entity Identifier (LEI) code to improve the quality and accuracy of financial data systems for better risk management.

(ANI)

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