Indian banks stagger under NPAs

Indian banks face more NPAs.

Indian banks will stagger under soaring non-performing assets (NPAs) for another year as the debilitated economy shows no signs of improvement.

The government, however, said the situation is not yet alarming since Indian banks are sufficiently cushioned by capital adequacy. R. Venkatachalam, Deputy Managing Director of State Bank of India, however, believes the worst is over as far as NPAs are concerned.

“There are indications of NPA levels dipping and that we are on a recovery path,” he said.

Piyush Agrawal, Managing Director and Country Risk Head of Citibank India, on the other hand, said he was not as bullish as Venkatachalam, saying that the industry may see “some real (positive) action” only after 12 months.

Other banking industry leaders also believe the worst is not yet over. They noted that the power sector and gas-based projects are suffering, while the telecom industry is on the verge.

Bad assets held by Indian banks have doubled in three years, from US$12.7 billion to US$25.6 billion while restructured assets almost trebled during the period from US$14 billion to US$41 billion.