Banks are in deep trouble!

The Economic Survey 2016 pointed out the increasing Non Performing Assets (NPAs), which have reduced the banking sector’s capacity to lend.

Sluggish growth and increasing indebtedness in some sectors of the economy have impacted the assets quality of banks and this is a cause of concern.

Liquidity conditions were generally tight during the first quarter of 2015-16, mainly due to slow government spending in the beginning of the year.

After easing conditions during the Q2, the third quarter saw tightened liquidity conditions.

The Economic Survey 16 stated that during the current financial year, year on year growth in gross bank credit outstanding has remained around 10%.

The year on year growth in time deposits fell to 10.6% in December 2016 due to household saving were channelized to other areas like gold and real estate.

The gross bank credit to the services sector grew at sub 7% in May – November 2015 though it increased to 9.2% in December 2015.
In agriculture sector, there was a downturn from November 2014.

The survey says that the slowdown in growth in the balance sheets of banks witnessed since 2011-12 continued in 2015-16.

The estimated capital requirement is likely to be about Rs 1.8 trillion by 2018-19. Out of this, the government of India proposes to make Rs 70,000 crore available out of budgetary allocations during the current and succeeding years.

Economic Survey 2015-16 mentions that the number of new basic saving bank deposit accounts rose considerably during the year on account of the government’s initiative under Pradhan Mantri Jan Dhan Yojna.

The number of such account increased to 44.1 crore for the period ending September 2015 and total number of banking outlets went up to 5.67 lakhs.

The Bombay Stock Exchange declined by 8.5% (Up to January 5, 2016) over March 2015, mainly on account of turmoil in Global Equity Markets.

The net investment by Foreign Institutional Investors/FPIs in the Indian market has been Rs 63,663 crore in 2015 as compared to Rs 2,56,213 crore in 2014.