Rs 30k cr loans may turn bad in 10
The Hindustan Times, January 15, 2010, Page 24
Pradeep Thakur TNN
New Delhi: Indian banks appear to have saddled themselves with significant liabilities with a report pointing to big accumulation of non-performing assets (NPAs) in 2010.
On Monday, global rating agency Fitch warned that NPAs of banks were likely to go up by 1%. The report has made specific reference to restructured loans, saying that credit worth Rs 30,000 crore in this category alone could turn bad by next year when two-thirds of them are expected to mature.
The caution comes in the wake of RBI’s advisory to banks to be more prudent in extending credit on teaser rates. During 2008-09 and in the first quarter of 2009-10, banks on an average restructured 4.4% of their total loans, up from 0.71% in 2007-08. Restructuring was mostly in the form of rescheduling principal for a period of 12 to 24 months, thereby giving the borrowers time to see off the downturn.
In 2009, besides lowering interest rates, many of these banks had restructured their existing loan portfolios of the commercial real estate due to rising inventories and financial crunch faced by the sector. While overall the NPAs of banks had increased from Rs 55,800 crore on March 31, 2008 to Rs 66,900 crore in March 2009, the credit extended to commercial real estate went up phenomenally.
The total outstanding credit to the commercial real estate of Indian banks, both government-owned and private, at the end of March 2009 was Rs 91,500 crore as against Rs 63,000 crore till March 2008. This was not only an increase of 45% over the previous year but was more than double the amount of Rs 44,000 crore exposure of these banks during the boom period of 2007.
The major portion of this huge lending came from the government banks. This despite the fact that the RBI had prescribed regulatory limits on banks exposure to individual and group borrowers as a preventive measure given the ongoing sub-prime crisis in the western world. A part of this growth was also due to the existing loan portfolio being restructured by banks for the failure of borrowers to pay.
The Hindustan Times, January 15, 2010, Page 24
Pradeep Thakur TNN
New Delhi: Indian banks appear to have saddled themselves with significant liabilities with a report pointing to big accumulation of non-performing assets (NPAs) in 2010.
On Monday, global rating agency Fitch warned that NPAs of banks were likely to go up by 1%. The report has made specific reference to restructured loans, saying that credit worth Rs 30,000 crore in this category alone could turn bad by next year when two-thirds of them are expected to mature.
The caution comes in the wake of RBI’s advisory to banks to be more prudent in extending credit on teaser rates. During 2008-09 and in the first quarter of 2009-10, banks on an average restructured 4.4% of their total loans, up from 0.71% in 2007-08. Restructuring was mostly in the form of rescheduling principal for a period of 12 to 24 months, thereby giving the borrowers time to see off the downturn.
In 2009, besides lowering interest rates, many of these banks had restructured their existing loan portfolios of the commercial real estate due to rising inventories and financial crunch faced by the sector. While overall the NPAs of banks had increased from Rs 55,800 crore on March 31, 2008 to Rs 66,900 crore in March 2009, the credit extended to commercial real estate went up phenomenally.
The total outstanding credit to the commercial real estate of Indian banks, both government-owned and private, at the end of March 2009 was Rs 91,500 crore as against Rs 63,000 crore till March 2008. This was not only an increase of 45% over the previous year but was more than double the amount of Rs 44,000 crore exposure of these banks during the boom period of 2007.
The major portion of this huge lending came from the government banks. This despite the fact that the RBI had prescribed regulatory limits on banks exposure to individual and group borrowers as a preventive measure given the ongoing sub-prime crisis in the western world. A part of this growth was also due to the existing loan portfolio being restructured by banks for the failure of borrowers to pay.
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