Bad loans being formed at a slower pace now, says RBI

RBI Deputy Governor S S Mundra has said that the pace at which new non-performing assets (NPAs) or bad loans are being formed has slowed down, even as some banks have posted losses for Q1 of the current fiscal citing higher provisioning.

He added that most of the banks are adequately capitalised and would be helped by the government in the future if need arises.

India’s public sector banks have been pretty cash-strapped for some time, because of which the government has announced an infusion of Rs 22,915 crore in 13 such banks, including SBI and Indian Overseas Bank.

"When I look at individual results, there are number of banks for whom it appears that the worst is over but then there are other banks...still they are in middle of it and they would need to do some work before they get out of it," Mundra said when asked on the condition of these banks.

"It would be naive to believe that there won't be any NPA formation but the pace of new NPA formation has clearly decelerated, that is what the major trend is," he added.

Gross NPAs of the public sector banks, which was 5.43% (Rs 2.67 lakh crore) of advances in 2014-15 jumped to 9.32% (Rs 4.76 lakh crore) in last fiscal.

Image source