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NPAs hit banks’ profitability in 2018; addressing NBFC concerns: RBI
Mumbai, Dec 28 (IANS) Non-performing assets (NPAs or bad loans) weighed down the balance sheets of banks necessitating large provisioning, which adversely affected their profitability, especially of state-run banks during 2018, the Reserve Bank of India (RBI) said on Friday.
In its “Trends and Progress of Banking in 2017-18” report, the RBI also said that it is addressing the concerns of non-banking finance companies (NBFCs) over acute liquidity crunch following the series of payment defaults by Infrastructure Leasing & Financial Services (IL&FS) over August-September.
“The overhang of stressed assets weighed down the consolidated balance sheet of the banking sector, necessitating large provisions, which adversely affected their profitability during 2017-18,” the central bank report said.
Recent data for the first-half of 2018-19, however, indicate that the NPAs have begun to stabilise, “albeit at an elevated level; capital positions have been buffered and the provision coverage ratio has improved”.
“The recent concerns about some NBFCs are being proactively addressed. The consolidated balance sheet of NBFCs expanded in 2017-18 and during the first-half of 2018-19,” the RBI said.
“The balance sheets of NBFCs, especially that of companies that provide loan finance, have been growing manifold against the backdrop of relative decline in their cost of lending vis-à-vis banks and subdued credit growth of scheduled commercial banks in the previous three years.”
The central bank said this year can be considered a watershed in terms of setting up of a “new, comprehensive, decisive and credible” NPAs’ resolution framework in February under the mandate of the Insolvency and Bankruptcy Code (IBC).
The new framework requires banks to report a default even if the repayment is due for more than a day. Thereafter, they are expected to introduce a resolution plan to ensure that the borrower repays the dues on time. In case the banks are unable to implement the resolution plan within the time limit of 180 days, they have to compulsorily admit the account into the bankruptcy process under the IBC.
According to the report, of the 21 public sector banks (PSBs), the 11 that are under the RBI’s Prompt Corrective Action (PCA) framework have shown lower growth in gross non-performing assets (GNPAs) as compared to non-PCA banks.
“The PCA banks have also shown lower growth in GNPAs, relative to non-PCA state-run lenders,” it said.
Those under the PCA are Allahabad Bank, United Bank, Corporation Bank, IDBI Bank, Uco Bank, Bank of India, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce, Dena Bank and Bank of Maharashtra.
The banks under PCA, which imposes lending restrictions, have also increased recoveries, contained their growth in advances and deposits, reduced riskiness of assets and focused on better rated assets, the RBI said.
“The sharper increase in NPA ratios compared to non-PCA PSBs is also because of decline in advances by the former. As a result, profitability has taken a hit as reflected in negative return on assets,” the report said.
–IANS
bc/nir
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Dr. Abhishek Verma Dedicates a Shelter in Memory of His Mother, Veena Verma, at KGMU; Inaugurated by Daughter Nicolle Verma
World-renowned business tycoon Dr. Abhishek Verma has supported Foodman Vishal Singh’s Hunger-Free World mission. In memory of his mother, Late Veena Verma, who was a 3 term Rajya Sabha MP.
Dr. Verma dedicated a state-of-the-art free permanent shelter for the attendants of patients at KGMU Medical University, Lucknow, under the aegis of Vijay Shree Foundation. His daughter, Nicolle Verma, inaugurated the shelter.
During the event, Foodman Vishal Singh honored Nicolle Verma by presenting her with a memento. Mrs. Nidhi Sharma and Avantika Yadav, associated with the organization, welcomed her with garlands. Following this, Nicolle Verma distributed essential items to the attendants and also handed out fruits. She became emotional remembering her grandmother on her birth anniversary.
On this occasion, she also inaugurated the “Veena Verma Sevalaya” in memory of her grandmother, Veena Verma, to serve the attendants. She expressed, “I feel proud that my family is engaged in nation-building as well as social service. Today, in collaboration with Vijay Shree Foundation founder Foodman Vishal Singh Ji, I feel immensely proud to dedicate this shelter for the poor, helpless, and needy attendants of patients battling serious illnesses like cancer. I am honored to be associated with the Hunger-Free World Mission for humanity.”
Inspired by the continuous humanitarian service provided by Vijay Shree Foundation over the past 17 years, Nicolle Verma donated 10 lakh rupees to support the cause. The purpose of this donation is to ensure that services continue for the needy attendants of patients suffering from severe illnesses in hospitals, as facilitated by Foodman Vishal Singh.
It is noteworthy that Dr. Abhishek Verma’s family has a legacy of public and philanthropic service. They are helping millions to carry forward the values and service work of their parents. On the occasion of his mother’s birth anniversary, Dr. Abhishek Verma dedicated this state-of-the-art permanent shelter at Lucknow Medical College to serve the attendants of patients through the Vijay Shree Foundation.
Supporting Foodman Vishal Singh’s Hunger-Free World mission, Dr. Abhishek Verma assured that he would continually support keeping this flame of humanity alive. He also promised to assist in providing medicines to the helpless patients.
Continuing her grandmother’s legacy of service, Nicolle Verma personally served food to the needy patients and attendants. She said, “It is our good fortune to have received the joy of doing this noble work today through Foodman Vishal Singh. I have taken another step forward in carrying my family’s values and cooperation by joining hands with the Vijay Shree Foundation. My father taught me to serve and help the needy, and I feel happy when I bring a smile to someone’s face.”
On the birth anniversary of the late Veena Verma, the event organizer, Vijay Shree Foundation founder Foodman Vishal Singh, said, “We feel proud and happy that Dr. Abhishek Verma, a globally renowned business tycoon, has extended his support to uplift our country from the hunger index. Today, on his mother’s birth anniversary, he inaugurated a state-of-the-art permanent shelter at Lucknow Medical College, which will always be helpful for the needy attendants of patients. It is a pleasure for me and the organization to receive the affection of Mr. Verma.”
The event was attended by General Manager Verma Family Office Hemant Garg, Sonu Rajput, and the organization’s volunteers, including Sandeep Singh, Parmeshwar Ji, Prashant Rao Gautam, Balram Singh, Ramesh Chaudhary, Suman, Jeetu, Anil, Suraj, Vinay, Manish Bhadauria, Manas Mehrotra, Vivek, Apurv, Happy, and others.
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