Data obtained via RTI & RBI’s DBIE database indicates that while Gross NPAs have reduced from the high of 2017-18, write-offs have also broadly increased. Here is a look at the trend in Gross NPAs, Write-offs, New Accretion to NPAs, and actual recoveries.
The Loans or advances provided by the banks are considered assets, as the banks earn interest from them. However, the banks also carry the risk of default in loan repayment. Such loans which are overdue for a specific period are considered Non-Performing Assets (NPAs). The detailed definition of what is considered an NPA can be seen here.
NPAs are not desirable from a banking perspective. A higher volume of NPA is one of the challenges ailing the Indian Banking system. There are various factors that contribute to loans turning into NPAs. Challenges relating to irrational lending, deficiencies in monitoring, slow-down in the economy, etc. are a few of the various factors influencing the NPA situation in the country. Over the years, the Government of India has taken various steps to reduce the NPA burden including write-offs, incentives for repayment, among others.
So, what is the current NPA situation with the Indian Banking sector, and what are the recent trends? Who are the major contributors towards the NPAs? In this two-part series on NPAs, we analyse the data to throw some light on these questions. In the first story, we look at the trends in Volume of NPAs, Write-offs and Recoveries across different types of bank groups.
Methodology: The data being analysed is obtained in response to a Right to Information (RTI) application filed with the Reserve Bank of India (RBI). The information includes – New Accretion to NPAs, Actual Recoveries and Write-offs across the different types of banks in the country. The Bank group types include – Public Sector Banks, Private Sector Banks, Foreign Banks & Small Finance Institutions. In the story, Total Banks would refer to the cumulative sum of these 5 types of Banks. The information obtained is for the period 2014-15 to 2021-22 (as on 31 December 2021). The Gross NPA data is obtained from RBI’s DBIE statistics.
The total write-offs for the five-year period 2016-17 to 2020-21 is around Rs. 8.8 lakh crores
As per RBI’s DBIE statistics, the Gross NPAs of all banks for the year 2020-21 is around Rs. 8.41 lakh crores. It is the continuation of the declining trend in the value of Gross NPAs for the last few years. After a peak in 2017-18, when the gross NPAs increased to 10.37 lakh crores, there has been a declining trend.
During this period, the trend in new accretion to NPAs s i.e., the newly added NPAs have seen a varying trend. After a high of Rs. 9.66 lakh crores in 2017-18, the accretion to NPAs has seen a decreasing trend. In 2020-21, there was an accretion of Rs. 4.8 lakh crores to NPAs. By the end of the 3rd quarter in 2021-22, the new accretion of NPAs amount to Rs. 4.5 lakh crores. As indicated earlier, this information is obtained through an RTI filed by Factly.
In 2020-21, the value of Actual Recoveries was Rs.1.59 lakh crores. It has to be noted that the actual recoveries refer to the recoveries out of those categorized as NPAs and not the recoveries for written-off loans. The actual recoveries show a declining trend from the high of Rs. 2.23 lakh crores in 2019-20, wherein it was Rs. 2.38 lakh crores in 2018-19. During the first three quarters of 2021-22, the recovery is around Rs. 1.46 lakh crores.
Despite a declining trend in the recovery of the loans, we have seen that that there is a fall in the gross NPAs. The write-offs by the banks can be a reason for this. In 2020-21, NPAs worth Rs.1.91 lakh crores were written off by the banks. In 2019-20, the write-offs were around Rs. 2.2 lakh crores. Overall, during the five-year period 2016-17 to 2020-21, the total value of NPA write-offs amounts to around Rs. 8.8 lakh crores. It forms a significant portion of NPAs.
However, these trends vary across the banks. Here is a look at the Banking groupwise trends in NPAs.
Around 80% of the Write-offs during five-year period 2016-17 to 2020-21 are by Public Sector Banks
The Public sector banks account for a major share of the total Gross NPAs. In 2020-21, the NPAs of Public sector banks constitute around 72% of the total, with the Private Sector Banks, Foreign Banks & Small Financial Institutions accounting for the rest.
Within the Public Sector Banks, the State Bank of India and Punjab National Bank have the highest share of gross NPAs. The Gross NPAs of Public sector banks have had a declining trend since 2018-19. This could be because of the write-offs and decreased new accretion in these years. Although the Rs.1.35 lakh crores written-off during 2020-21 is less than the previous years, overall, a total of Rs. 7.03 lakh crores were written off by public sector banks in the five years between 2016-17 and 2020-21. This accounts for around 80% of the total write-offs during that period. State Bank of India, and the Punjab National Bank have the highest share of these write-offs.
Steady increase in the gross NPAs of Private Sector Banks
Compared to the Public Sector Banks, the Private sector banks have a lower volume of NPAs.
However, there has been an increasing trend in the NPAs accumulated by private sector banks in recent years.
The Gross NPAs of these banks in 2014-15 was Rs. 33.7 thousand crores. By 2017-18, it nearly quadrupled to Rs. 1.2 lakh crores. By 2019-20, the value of NPAs peaked to Rs. 2.05 lakh crores. There is a slight fall in 2020-21 at 2.02 lakh crores.
ICICI, IDBI, HDFC & Axis Banks are the four major banks, with the highest value of NPAs. These are also the larger private-sector banks. The increasing trend of NPAs is visible through the increased value of new accretion to NPAs. In 2014-15, it was Rs. 49.9 thousand crores, followed by a year-on-year increase until 2019-20, wherein Rs. 2.22 lakh crores NPAs were newly added. During the three quarters of 2021-22, the new accretion of NPAs is Rs. 2.01 lakh crores, which is already higher than in 2020-21. Comparatively, the actual recoveries are lower, though they show an increasing trend. The write-offs show a year-on-year increase. The write-offs in 2020-21 were Rs. 52.75 thousand crores, the highest annual figure since 2014-15.
Increase in the Gross NPAs of Small Financial Institutions in 2020-21
Compared to the public sector banks & private banks, the volume of NPAs of Small Financial Institutions (SFIs) has been lower, with these institutions also being comparatively smaller. However, there is a developing situation with the NPAs in the SFIs. In 2020-21, the value of NPAs in these financial institutions was Rs. 11.9 thousand crores compared to only Rs.3.42 thousand crores in 2019-20. Further, the new accretion to NPAs in 2020-21 was Rs. 10.9 thousand crores. The Gross NPAs could further increase, as the new accretion to NPAs is Rs.14.9 thousand crores in just the first three quarters of 2021-22. Compared to the other banks, the trends in Foreign Banks do not have much variance over the years.
From the data, it is evident that few of the Public Sector Banks and Private sector banks account for a major share of the Gross NPAs and the amount of NPAs being written off. Since banks provide credit to various sectors of the economy, an analysis of the NPAs sector-wise could provide more insights. In the second part, we would cover the sector-wise analysis.