Bloomberg: Mumbai: Saturday, August 19, 2017.
Nearly Rs 1
lakh crore in loans were overdue by more than 60 days, and were classified as
so-called ‘Special Mention Accounts-2 (SMA-2) by banks, at the start of the
current financial year, shows data from the Reserve Bank of India (RBI)
accessed by BloombergQuint under the Right To Information (RTI) Act.
This pool of
loans represents debt that would be considered at high risk of slipping into the
bad loan category and adding to the gross non performing assets (NPAs) of more
than Rs 8 lakh crore sitting on the balancesheets of Indian banks. While the
quantum of SMA-2 accounts has come down over the 12-month period up until March
2017, the reduction has been more due to slippage of these loans into the NPA
category, rather than a recovery in these accounts.
According to
data provided by the RBI, loans under the SMA-2 category stood at Rs 97,102
crore, as on March 31, 2017, as compared with Rs 1.29 lakh crore a year ago.
The number stood at Rs 1.13 lakh crore as on March 31, 2015.
Between March
2015 and March 2017, gross bad loans of banks more than doubled from Rs 3.22
lakh crore to over Rs 7.7 lakh crore. As of the end of the June 2017 quarter,
gross NPAs of listed banks stood at Rs 8.3 lakh crore.
The RBI had
introduced the SMA categories as part of its framework for resolution of
stressed assets released in January 2014. The regulator had stated that this
would help banks deal with stressed assets even before they turned NPA.
Accounts which have delayed repayment up to 30 days are categorised as SMA-0;
those which have delayed repayment between 30-60 days are put under SMA-1; and
accounts where repayment has been delayed for more than 60 days are classified
under SMA-2. As per RBI’s asset classification norms if a borrower delays
payment for more than 90 days after the due date, the account is classified as
an NPA.
According to
a senior official at a large state-owned bank, while lenders have been seeing
some upgrades from SMA cases, the pace has been very slow. Unless recoveries and
upgrades pick up pace and match resolution, banks cannot hope to see much
improvement, the banker said.
Large lenders
like State Bank of India (SBI), ICICI Bank and Axis Bank have all created a
list of stressed accounts which are most at risk of turning bad. These
watch-lists, created at the start of fiscal 2017, have since reduced in quantum
but only because many of these accounts have turned bad.
In March
2016, SBI had reported a watch list of Rs 34,776 crore, which came down to Rs
13,310 crore in March 2017. Following SBI’s merger with five associate banks
and Bharatiya Mahila Bank in April 2017, the watch list had risen back to Rs
34,427 crore. As of the end of the June quarter, the list had reduced to Rs
24,444 crore.
ICICI Bank’s
‘drill-down list’, which was at over Rs 44,000 crore in March 2016, came down
to a little over Rs 20,000 crore in June 2017. Axis Bank saw its watch list
move from Rs 22,628 crore in March 2016 to Rs 9,436 crore in March 2017 and Rs
7,941 crore in June 2017.
Banks are now
attempting to use the Insolvency and Bankruptcy Code to resolve a number of
large and mid-sized cases. Over the last six months, since the notification of
the Bankruptcy Code, the number of cases referred to the National Company Law
Tribunal (NCLT), has reached 2,050 as of 30 June 2017, said Credit Suisse in a
report dated August 17.
We are
hopeful that once these assets (SMA-2) have slipped, they will be upgraded
because we are using the NCLT adequately. The expectation is that in some of
these cases, promoters will come and discuss a settlement option, since their
powers may be suspended.
AK Goel,
Executive Director, Union Bank of India.
According to
Karthik Srinivasan, senior vice president at ICRA Ltd, with the RBI listing
accounts for immediate insolvency action and banks being given only six
additional months to resolve some of the other large accounts, the success of
the NCLT route would be crucial in determining the pace of resolution of
stressed assets in the banking sector.
.JPG)
.JPG)
