Note ban may spike bad loans in second half of FY17

Mumbai: With demonetisation affecting various industries, the NPA situation in banks could worsen in October-March period (second half of FY17) until there is a shift in the state of the economy and the currency situation normalises.

There are also new areas of concern as data for September 2016 reveals that the level of stressed assets in the retail segment was 2.4 per cent. The highest level was in education loans followed by auto, consumer durables and mortgages.

Care Ratings has red flagged the NPA ratio for the retail segment as a cause for concern given that this has been the fastest growing piece in the credit profile at 7.9 per cent during the first half of the year as against four per cent for the system.

The industrial sector contributed over 15 per cent to the NPAs followed by agriculture and services in the region of six per cent and retail loans which were the lowest at 2.3 per cent.

Public sector banks saw their  NPAs jump from 13 per cent in March 2016 to 15.8 per cent in September while private sector and foreign banks saw marginal increase in NPAs from 4.5 per cent to 4.6 per cent and 4.5 per cent to 4.6 per cent respectively in the same period.

The gross NPAs of the banking system have increased from 7.8 per cent of total advances in March 2016 to 9.1 per cent in September 2016. The worrisome factor, according to Care, is that stressed assets ratio is above 10 per cent for all the sectors which account for about 90 per cent of credit to industry.