MUMBAI: Reserve Bank guidelines on providing adequate provisioning to cover bad loans would continue to put pressure on banks’ profitability for some time, even though some banks are witnessing reduction in proportion of NPAs, RBI Deputy Governor S S Mundra said today.
Mundra was responding to media queries in a press conference post RBI’s sixth bi-monthly monetary policy review here.
“Overall, the (banking) system has shown an improvement in operating profit. But on the back of our provisioning, I think some of the pressure on net profit would continue,” Mundra said.
Briefing about the asset quality in banking system, Mundra said: “We are yet to receive the results from all the banks for the third quarter…while there is some elevation in gross NPA ratio in the banking system across category, whether it is public sector banks or private sector banks, but for the first time in few quarter, this time it is seen that in few banks the ratio has come down vis-a-vis the preceding quarter.”
Likewise, on the net NPAs front, Mundra said in consistent with gross NPAs, there would be an elevation, but in a large number of banks, the ratio has come down.
“…(it) is clearly showing that the level of provisioning is quite adequate. Also, there has been conversion of restructured assets falling into NPA category and as a result, across the industry there is a reduction in the percentage of restructured assets,” said the deputy governor.
During April-September period of the current fiscal, public sector banks’ gross NPAs have hit Rs 5,89,502 crore, about 11.82 per cent of the gross advances they furnished, according to a recent government data.
In previous fiscal, public sector banks had gross advances of Rs 51,04,915 crore, of which Rs 5,02,068 crore (9.83%) was categorised as gross non-performing assets (GNPA), Minister of State for Finance Santosh Gangwar informed the Lok Sabha last week.
On the other hand, gross NPAs of private sector banks were Rs 48,380 crore, meaning just 2.70 per cent of gross advances of Rs 17,91,681 crore during the fiscal 2015-16.
On capital adequacy ratio, Mundra stated most of the banks were well placed to meet the regulatory norms they were required to have at the current point of time.
“But going forward, quite a few number of banks would be required to raise the additional capital,” he added further.