Due to increased defaults by corporate clients, domestic banks gave recorded a steep rise in their non-performing assets (NPAs) in the first six months of the current fiscal year. Banks have reported up to 85 percent increase in their bad debts so far in this financial year.
Apart from the increase in bad debts, the number of corporate debt restructuring cases have also risen many fold this fiscal. It is reported that in the first and second quarter of this fiscal, there were 74 CDR cases, which amounted to a total debt of Rs.40, 000 crore.
In addition to this, as many as 35 banks have recorded a rise in its gross Non-Performing Assets (NPAs) as compared to the NPAs they had reported in the last fiscal. Banks such as Punjab national bank, Lakshmi Vilas bank and Allahabad Bank have recorded 60 percent increase in their NPAs. On the other hand, for banks such as South Indian Bank bad loans have grown by 86 percent whereas Bank of India, Corporation bank and Indian Overseas Bank have more than 50 percent rise in their NPAs.
On the matter, the banking regulator, Reserve Bank of India said in its report titled, 'Trend and Progress of Banking in 2011-12' that "Banks need to, not only utilise effectively, the various measures put in place by RBI and the government for the resolution and recovery of bad loans, but also have to strengthen their due diligence, credit appraisal and post-sanction loan monitoring systems to minimise and mitigate the problem of increasing NPAs."