Data obtained via RTI indicates that while the new accretion to NPAs decreased in the case of Agriculture for public sector banks, the same has significantly increased in Agriculture & Retail sectors in the case of private banks. The value of write-offs in the Services sector have also increased.
In the previous story, we analysed the trends in NPAs across various types of Bank groups. Data indicates that Public Sector & Private Sector banks not only have a major share of the Gross NPAs but also account for a major part of the NPAs written off. In this story, we continue with the analysis of NPAs by looking at the different sectors to which banks provide credit.
Methodology: The data being analysed is obtained in response to a Right to Information (RTI) application filed with RBI. The NPA information includes the Bank wise NPAs across various sectors. The sector-wise categorization provided in the RTI response includes – Agriculture & Allied, Industry, Food Credit, Other Non-food credit, Retail Loans, and Services. The NPA information available includes – Actual recoveries out of NPAs, New Accretion and Write-offs. The sector was Gross-NPAs is not considered in the analysis.
Increase in New-Accretion and Write-offs among Private Sector Banks in Agriculture Sector
Agriculture & Allied activities constitute a key sector to which credit is extended by the banks. Around 43% of the Indian workforce works in the Agricultural sector, making it an important livelihood provider. The vagaries & challenges involved with agriculture also make it prone to the credit turning into bad debts for the banks.
Here is a snapshot of the trend in NPAs in the Agriculture Sector:
- Data indicates that the total value of New Accretion to NPAs during 2020-21 for the Agriculture & Allied sector is Rs. 32.69 thousand crores. Of this, Rs. 19.4 thousand crores are for Public Sector Banks and around Rs. 11.5 thousand crores are for Private banks. State Bank of India has the major share of the new accretion to NPAs among the Public sector banks.
- While the Public sector banks continue to have a higher share of new accretion to NPAs, there is a fall in the total value compared to earlier years. In 2019-20, the total value of new accretion to NPAs was Rs. 42.1 thousand crores.
- Meanwhile, there is an increase in the new accretion to NPAs among the Private Sector Banks. In just 9 months of 2021-22 for which the data is available, the total value of new accretion to NPAs was Rs. 19.47 thousand crores. Comparatively, it was about Rs. 11.5 thousand crores in the 12 months of 2020-21. There has been a consistent year-on-year increase in the new accretion to NPAs for the Private sector banks.
- In the previous three years, i.e., 2018-19 to 2020-21, the value of Write-offs by Public sector banks crossed Rs. 10 thousand crores each year. Comparatively the value of NPA write-offs is lower among Private banks but has seen a year-on-year increase.
Rs. 1.03 lakh crores NPAs written off for Industry sector in 2020-21,
As per the Information from RBI, NPAs worth Rs. 1.03 crores were written off across banks for the industry sector in 2020-21. However, this is less than the write-offs in 2019-20 which was Rs.1.44 lakh crores. This fall is largely attributed to the fall in the amounts written off by Public Sector banks. In 2020-21, the value of write-offs by public sector banks was Rs. 82.9 thousand crores. In 2019-20, this was Rs. 1.25 lakh crores. However, it was even higher in 2018-19, with Rs. 1.34 lakh crores.
In the case of Private banks, there is a year-on-year increase. In 2014-15, the value of write-offs by Private Banks for the Industry sector was Rs. 3.06 thousand crores. By 2020-21, the annual write-off increased to Rs. 18.5 thousand crores. Among foreign banks, the trend has been largely fluctuating with the highest write-off during 2016-17 with around Rs. 4.1 thousand crores. While the value of write-offs is less among Small Finance banks, it is already Rs. 140 crores during the first nine months of 2021-22, while in the previous year it was Rs. 52 crores for the entire year.
In the case of new accretion to NPAs, there is a major fall among the public sector banks. New Accretions to NPAs for Public Sector Banks in 2015-16 was Rs. 2.52 lakh crores and in the following year, it was Rs. 2.22 lakh crores. However, it fell to around Rs. 40 thousand crores in 2020-21. The fall is also seen among Private sector banks in 2020-21. Meanwhile, significant new accretion to NPAs is seen for Small Finance banks in 2020-21 and 2021-22.
Increasing Trend of Write-offs across Public & Private Sector banks for Services Sector
In the Agriculture and Industry Sector, a declining trend is observed in the case of write-offs by Public Sector banks while there is a generally increasing trend among the Private sector banks. However, in the case of the NPAs relating to the services sector, an increase in the value of write-offs can be observed in the case of both the public sector and private sector banks.
For the Public sector banks, the value of write-offs consistently increased from 2016-17, except for 2020-21. In that year, Rs. 27.2 thousand crores of NPAs were written off, while in the previous year of 2019-20, it was Rs. 34.2 thousand crores. However, during the 9 months for which the data is available in 2021-22, the value is already Rs. 31.2 thousand crores.
In the case of Private banks, there has been an increase in recent years. In 2018-19, Rs. 4.1 thousand crores were written off for the Services sector, which more than doubled to Rs.10.4 thousand crores in 2019-20. In 2020-21, it further increased to Rs.16.8 thousand crores.
In the case of new accretion to NPAs, there is a decline across banks in recent years. While the recovery of NPAs increased in 2021-22 in the case of public sector banks after a lower recovery in 2020-21, there is an increasing trend of NPA recoveries by Private sector banks.
Exponential increase in the New Accretions to NPAs and Write-offs in Retail Sector among Private Banks
There is a declining trend in the new accretion to NPAs among the Public sector banks. After a high Rs. 19.2 thousand crores in 2016-17, there has been a decline. However, the situation is different in the case of Private sector banks. In 2015-16, the new accretion to NPAs was Rs. 5.4 thousand crores which increased to Rs. 39.8 thousand crores in just the first nine months of 2021-22. There has been a continuous increase from 2014-15 to 2021-22.
In the case of Write-offs, there is a higher increase among Private sector banks. After a consistently increasing trend, the annual write-offs by Private banks to the retail sector increased to Rs. 8.6 thousand crores in 2019-20. This increased to Rs. 14.1 thousand crores in 2021-22. In the first nine months of 2021-22, this value has already increased to 1.76 thousand crores.
The NPAs among the Food Sectors are comparatively lower. In the rest of the sectors, data from RBI indicates that there is an increase in the new accretion to NPAs as well as the write-offs in recent years. The information on what constitutes this other non-food credit is not provided by RBI in its response. Nevertheless, the total values are much lower than the other major sectors discussed above.
The data indicates that while the trends vary across the sectors, a broader visible trend is the increase in the new accretion to NPAs as well as write-offs among the Private sector banks in recent years.
Featured Image: Sectorwise NPA Story