Banks Continue to Remain Stressed

Tue, 12 Jul Pre-Open

   Previous Close   

   09:30 am   

   11:30 am   

   01:30 pm   

   Closing   

Recently, Reserve Bank of India (RBI) released its biannual Financial Stability Report. The key-takeaway is that the condition of the banks especially public sector banks (PSBs) has deteriorated. The gross non-performing assets (GNPA) as a percentage of total advances rose to 7.6% in March 2016 from 5.1% in September 2015. The GNPAs are the highest as witnessed in twelve years. Further, RBI stated that this ratio could further deteriorate to 9.3% by March 2017 under a severe stress scenario.

To add to the woes, the credit growth of Indian banks has slowed down, especially to the corporate sector. The credit growth of Indian banks slowed to 8.8% in March 2016 from 9.4% in September 2015. This is owing to their weak balance sheet. They are not lending to corporates for the fear of adding to bad assets.

However, the same cannot be said for the retail loans or what RBI calls personal loans. These include home loans, vehicle loans, credit card outstanding, consumer durable loans, loans against shares, bonds and fixed deposits, and what we call personal loans. The retail loans of banks have grown by 19.7% in the last one year.

Personal loans are easy to recover as compared to the corporate loans. Hence to avoid a further asset deterioration scenario, the banks are increasingly reducing their exposure to the corporate sector.

The government has always in the past come to the rescue of the public sector banks by recapitalizing it. The recapitalization takes place with the hard earned money of the taxpayers. This year too, the government plans to recapitalize the banks to the tune of Rs 250 billion.

This theory to perpetually bailout the public sector banks have not been productive. These public sector banks have continued to lend to already leveraged companies or stressed sectors, without proper credit appraisal policy in place. These banks know that the government will ultimately come to its rescue, which have in-turn led them to lending to businesses which lack conviction and fundamentals.

How can we resolve this never ending issue? The simple solution would be to privatize the public sector banks. There is no rationale behind the government running 27 banks. Once, the banks are professionally managed, there would automatically be a reduction in the stressed asset scenario. However, considering the aversion of private sector banks to lend to corporates, this looks highly unlikely. Under these circumstances, it would be a slow, painful and gradual recovery for the banks.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

Read the latest Market Commentary

Top Gainers TodayTop Gainers over 1-WeekTop Gainers over 1-MonthTop Gainers over 1-YearTop Gainers over 3-YrsTop Gainers over 5-YrsTop Losers TodayTop Losers over 1-WeekTop Losers over 1-MonthTop Losers over 1-YearTop Losers over 3-YrsTop Losers over 5-YrsOnly BuyersOnly SellersMost Active StocksMost Popular Stocks52 Week High Stocks52 Week Low Stocks

INDICESBSE (Rs 0 to 1)BSE (Rs 1 to 2)BSE (Rs 2 to 4)BSE (Rs 4 to 10)BSE (Rs 10 to 20)BSE (Above Rs 20)BSE - AllBSE-30BSE-100BSE-200BSE-500BSE AutoBSE BankexBSE Capital GoodsBSE Consumer DurablesBSE FMCGBSE HealthcareBSE ITBSE MetalBSE Oil & GasBSE PSUBSE TeckBSE RealtyBSE PowerBSE A GroupBSE B GroupBSE Mid-CapBSE Small-CapBSE Basic MaterialsBSE Consumer DiscretionaryBSE IndustrialsBSE UtilitiesBSE Sensex 50BSE Sensex Next 50BSE Bharat 22BSE 150 MidCapBSE 250 SmallCapBSE 250 LargeMidCapBSE 400 MidSmallCapBSE AllCapBSE LargeCapBSE SmallCap SelectBSE 100 LargeCap TMCBSE InfraBSE ManufacturingBSE CPSEBSE Private BankBSE Diversified FinancialsBSE MomentumBSE Low VolatilityBSE QualityBSE Enhanced ValueBSE Divident StabilityS&P BSE IPOBSE SMEIPOBSE 100 ESGBSE CarbonexBSE GreenexNSE (Rs 0 to 10)NSE (Rs 10 to 20)NSE (Above Rs 20)NSE - AllNSE-50NSE ITNSE Nifty Midcap 50NSE JR. NiftyNSE Bank NiftyNIFTY Next 50NIFTY 100NIFTY 200NIFTY 500NIFTY MidCap 100NIFTY SmallCap 250NIFTY SmallCap 50NIFTY SmallCap 100NIFTY LargeMidCap 250NIFTY MidSmallCap 400NIFTY AutoNIFTY Consumer DurablesNIFTY FinanceNIFTY FMCGNIFTY MediaNIFTY MetalNIFTY PharmaNIFTY Private BankNIFTY PSU BankNIFTY RealtyNIFTY Oil & GasNIFTY SME EmergeNIFTY CommoditiesNIFTY CPSENIFTY EnergyNIFTY India ConsumptionNIFTY InfraNIFTY MNCNIFTY PSENIFTY Serv SectorNIFTY100 Liquid 15NIFTY Midcap Liquid 15NIFTY Midcap 150 Quality 50NIFTY50 Equal WeightNIFTY100 Equal WeightNIFTY100 Low Volatility 30NIFTY100 Alpha 30NIFTY Alpha 50NIFTY Dividend Opportunities 50NIFTY High Beta 50NIFTY Low Volatility 50NIFTY200 Quality 30NIFTY 500 Value 50NIFTY 100 Quality 30SECTORSAgricultureAirlinesAluminiumAsset Management CompaniesAutomobilesAuto AncillariesBanks (Private)Banks (PSU)BankingCementChemicalsDefenceDiagnosticsDronesEngineeringElectric VehicleElectric Vehicle BatteryEnergy SourcesESGEthanolFertilizersFintechFMCGFoodGreen HydrogenHotelsInfrastructureInsuranceInvestment and FinanceInvITIT (Large)IT (Others)LogisticsMediaMetalMiningIndia's Big Tech StocksIndian PharmaMNC PharmaPSUPaintPaperPlasticPowerRating AgenciesReal EstateREITsRenewable EnergyRetailingSemiconductorShippingSteelSugarSupply ChainTelecomTextilesTravel Support Services

10 results 25 results 50 results 100 results All results

Indian Share Market Update: Top Gainers and Losers