Bad loans likely to jump by Rs 1.3 lakh crore

Bad loans with banks are likely to jump by Rs 1.3 lakh crore immediately with the country's highest court lifting its stay on recognition and classification of non-performing assets (NPA).
The gross NPA of banks could have been Rs 8.7 lakh crore or 8.3% of advances at the end of December last year, had banks recognised the NPAs, as against the reported Gross NPA of Rs 7.4 lakh crore, according to estimates. The Supreme Court had in September last year stayed the classification of bad loans to lessen the stress on borrowers amid the pandemic. On Tuesday, the Court lifted the stay saying that it would not interfere with banking regulations while directing banks to waive interest on unpaid interest on loans.

Reserve Bank of India mandates banks to classify loan assets as NPA after 90 days of non-payment of dues. On a proforma basis, the net NPA for the banks stood at Rs 2.7 lakh crore or 2.7% of advances as against the reported net NPA for all banks of Rs 1.7 lakh crore as of December 31, 2020, rating company ICRA said. Hence in absence of standstill by the Supreme Court, the gross NPAs for the banks would have been higher by Rs 1.3 lakh crore (1.2%) and net NPAs would have been higher by Rs 1 lakh crore (1%), the rating company said.

The Supreme Court told banks to waive interest on interest for all borrowers irrespective of loan amount. The government had already announced relief for borrowers having borrowings upto Rs 2 crore which was estimated to cost about Rs 6500 crore to exchequer. "As per our estimates, the compounded interest for six month of moratorium across all lenders is estimated at Rs 13,500-14,000 crore. With announcement of waiver for all borrowers, the additional relief of Rs 7000-7500 crore will need to be provided to borrowers,” ICRA said. ends