Bad loans: India’s RBI to crack the whip on erring banks
India's central bank may restrict more state-owned banks from further lending and impose a hiring freeze due to a high percentage of bad loans
India’s banking regulator is expected to take action against more state-owned banks for their ballooning bad loans. The Reserve Bank of India has already barred Dena Bank under its prompt corrective action (PCA) framework from further lending and hiring.
The RBI is expected to take similar action against four more banks currently under its PCA framework – Bank of Maharashtra, Oriental Bank of Commerce, Allahabad Bank and UCO Bank – as their financial profiles continue to be in bad shape, reports Business Standard.
None of the five banks have reported any improvement in their recently declared results for the January-to-March quarter, as the level of net non-performing assets (NPAs) remained high and return on assets (RoA) remained in the negative in 2017-18, the daily added.
Currently 11 state-owned banks are under the PCA framework, and the Indian government is to conduct a review of some of them on Thursday.
The value of bad loans held by India’s state-owned banks soared 1.5 times, from 2.67 trillion rupees on March 31, 2015, to 6.89 trillion rupees (US$102.3 billion) on June 30, 2017, according to a statement by the minister of state for finance, Shiv Pratap Shukla, to Parliament on April 6.
Of the 21 public-sector banks, 11 had NPAs greater than 15% of total assets, the minister revealed.
As of March 2016, Indian companies and individuals owed 4.1 trillion rupees to state-owned banks in overdue loans in the form of corporate lending, car loans, personal finance, credit-card dues and home loans, according to IndiaSpend.