Decoding NPAs

Mid and small companies, and the agriculture sector, are major contributors to banks’ bad assets.

- Anand Adhikari

Indian banks, especially public sector banks, have often been criticised for giving a long rope to the likes of Vijay Mallya of Kingfisher, Nitin Kasliwal of S Kumar’s or Manoj Tirodkar of GTL. Reams have been written about how large corporations and their high-and-mighty promoters have used the system to their advantage, which has resulted in the rise in gross non-performing assets (NPAs) from ₹2 lakh crore a few years ago to ₹6 lakh crore now.

However, an analysis of NPAs in the banking system provides a very different picture. Sample this: gross NPAs in the large corporate segment – loans of ₹500 crore, or more – is just at 2.9 per cent of the advances, compared to 9.7 per cent for the mid-corporate segment and 9.9 per cent for small and medium enterprises (SMEs).

In fact, industry data corroborates the gross NPA figures of State Bank of India (SBI). For 2015/16, the largest bank in the country had the highest NPAs in the mid-corporate segment at ₹41,515 crore – almost double that of large corporations in absolute terms. Likewise, NPAs of ₹17,032 crore in the SME segment were almost at par with the ₹20,696 crore for large corporations. This is true for most PSBs as they are big players in the large corporate segment, while private players have been more aggressive in the working capital, SME and retail segments. (see State of Play).