According to the latest statistics of RBI's Financial Stability Report, the agriculture loans and the loans provided to micro, small and medium enterprises (MSMEs) formed 36 percent of banks' nonperforming assets (NPAs). It is to be noted that loans given to these two sectors form priority sector lending, which is compulsory for all banks.
The report further mentioned that for the year ended March 2012, out of the total advances made to agriculture sector, about 4.6 per cent became nonperforming assets and out of the total advances made to MSMEs, about 4.8 percent became nonperforming assets.
In comparison, loans disbursed under retail credit segment (housing loans etc) saw far less payments defaults. NPAs in this segment fell to 2.8 per cent as on March 2012 from 3.2 per cent of the previous fiscal.
Banks have witnessed an overall increase in NPAs after shifting to computerized methods of identification of these. The earlier methods, which were manual, allowed discretion. One of the reasons of MSMEs not performing well in loan repayment is the continuous hike in interest rates, which makes it difficult for MSMEs to service the loans.
The advances given to large corporate houses also have their fair share of bad debts, but in such cases defaults do not get identified in the banks' books as these are restructured loans.
The total NPAs (including structured assts) recorded by the banking sector stands at 6.23 per cent for the year ending March 2012.