How long will the good run last?

In public, bankers say everything is hunky-dory, but the rising defaults in a few pockets don't exactly suggest this

- DANALA SINUSI TAMAL

Hold your breath.

In the financial year 2024, which ended in March, 26 listed banks 14 private banks, seven public-sector banks (PSBs) and five small finance banks - had less than 1 per cent net non-performing assets (NPAs). When did we last see such robustness in the Indian banking industry? assets The list of sub-1 per cent NPA banks includes the top three by the State Bank of India (0.57 per cent), HDFC Bank Ltd (0.33 per cent) and ICICI Bank Ltd (0.45 per cent).

Among others, Axis Bank Ltd (0.31 per cent), IndusInd Bank Ltd (0.57 per cent), Kotak Mahindra Bank Ltd (0.34 per cent), IDFC First Bank Ltd (0.6 per cent), IDBI Bank Ltd (0.34 per cent), YES Bank Ltd (0.6 per cent), Bank of Baroda (0.68 per cent), and Punjab National Bank (0.73 per cent) are members of this club.

They have achieved this through the recovery of bad loans, providing or setting aside money for them and even writing them off. The industry will need to do more. Why? Only six banks across three categories have less than 2 per cent gross NPAs. As the advance portfolio grows, NPAs in percentage terms go down. That's simple arithmetic.

In percentage terms, Punjab National Bank has the maximum gross NPAs (5.73 per cent), followed by Punjab & Sind Bank (5.43 per cent). Four others have more than 4 per cent, but less than 5 per cent gross NPAs. These are Bank of India (4.98 per cent), Union Bank of India, ESAF Small Finance Bank Ltd (4.76 per cent each) and the Jammu & Kashmir Bank (4.08 per cent).

Indeed, as the quality of loan assets improves, the requirement for provision goes down for banks.