A research conducted by Crisil reveals that Indian banking sector is divided on the basis of asset quality. Inspite of the economic slowdown and declining credit demand, private sector banks continue to maintain the quality of their assets, whereas public sector banks are recording more number of bad debts. This is a surprising revelation as both groups of banks lend to the same category of customers.
The analysis done by Crisil Research shows that the gross non-performing assets recorded by public sector banks, in the latest quarterly results, increased by 42 basis points. While the overall gross NPAs have risen by 53 percent on a year-on-year (y-o-y) basis, total loans have increased by 15 percent. Crisil suggests that this could be the result of increased stress in sectors such as construction, textiles, infrastructure and aviation.
On the matter, the President of Crisil Research, Mr. Mukesh Aggarwal said, "In contrast, private sector banks have been able to maintain their asset quality, due to higher exposure to the retail segment as well as stringent credit appraisal and recovery mechanisms for corporate loans."
According to the analysis, private sector banks have recorded a 1 bps decrease in gross non-performing assets, which stands at 1.92 percent.