Public Sector Banks’ Bad Loans More Than Doubled Over Two Years

In light of the Rs 11,000 crore fraud at Punjab National Bank, the RBI has placed 11 PSB’s scrutiny.

Indian public sector banks’ (PSB) bad loans soared 1.5 times, from Rs 2.67 lakh crore ($39.99 billion) on 31 March 2015, to Rs 6.89 lakh crore ($103.21 billion) – an amount that could electrify half of India’s households – on 30 June 2017, according to this reply to the Lok Sabha (lower house of parliament) by Shiv Pratap Shukla, minister of state for finance, on 6 April 2018.

Of the 21 public sector banks, 11 had non-performing assets (NPAs), greater than 15 percent of total assets, as per data cited by the minister. In light of the Rs 11,000 crore fraud at Punjab National Bank, the Reserve Bank of India (RBI) has placed all 11 under scrutiny, The Financial Express reported on 9 April 2018. Five more PSBs are expected to join the ranks. Demands that PSBs be privatised have also been reinvigorated since the fraud was unearthed in February 2018.

Among other corrective action, the RBI will restrict their lending activities, opening up of new branches and recruitment.

Indian companies and individuals owed Rs 4.1 lakh crore ($61.41 billion) to PSBs in overdue loans in the “non-priority sector”– mainly corporate lending, car loans, personal finance, credit card dues and home loans – as of March 2016. These NPAs, if fully recovered, would suffice to pay off distressed farm loans across eight states, with a third (32 percent) still left over, IndiaSpend had reported on 31 July 2017.

In the decade to 2016, bad loans in the non-priority sector rose more than 22-fold (2166 percent) from when they were valued at Rs 18,300 crore in 2006, the report said. During the same period, the sector’s share in public sector banks’ NPAs rose from 44.2 percent to 76.7 percent. This growth was particularly pronounced after 2011, when it became 12-fold (1110 percent) over five years.

This article was first published by India Spend. It has been republished with permission.

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