As of the end of last financial year the total NPA in the banking system stood at Rs 10.25 lakh crore
Criticising the financial institutions for ballooning debt levels and rising cases of non-performing assets (NPA), industrialist Rahul Bajaj accused lenders of having ‘destroyed profits’.
“Saddled by a huge overhang of bad loans or non-performing assets that have eroded their balance sheets and destroyed profits, most banks have neither the requisite financial strength nor the confidence to fund industrial growth,” said the Chairman of Bajaj Auto, India’s fourth biggest maker of two-wheelers, in the 2017-18 annual report of the company.
Banks have tightened debt norms following a series of cases of corporate debts gone bad. These include banks such as Punjab National Bank, State Bank of India and ICICI Bank to name a few. As of the end of last financial year, the total NPAs in the banking system stood at Rs 10.25 lakh crore.
State Bank of India topped the charts with a total NPA of Rs 2.23 lakh crore. ICICI Bank’s NPA stood at Rs 54,063 crore hile that of Axis Bank stood at Rs 34,300 crore. Companies are thus finding it difficult to meet their working capital needs.
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“This is not only affecting the bigger players but, much more so, the medium and smaller scale corporate entities across India who are now hard pressed to secure necessary working capital let aside term loans for investments. Despite the benefits that ought to accrue from the new bankruptcy process in India, I do not see a quick resolution to this problem”, added Bajaj in his address to the shareholders.
Last year, the Narendra Modi-led government announced a Rs 2.11-lakh crore plan for bank recapitalisation to pull out all state run banks from the mess.
“I am neither a soothsayer nor its modern day avatar, an economist. Thus, I find it difficult to predict what a country’s GDP growth will be like until the numbers are published and become known to all. Even so, I had somehow expected that we might cross 7 percent growth in FY2018. The citizens of the country certainly deserved it. However, it looks as if I will be disappointed”, added Bajaj.
The second advance estimate of national income released on February 28, 2018 by the Central Statistical Organisation of the Government of India has pegged India’s real GDP growth for 2017-18 at 6.6 percent. It would be a deceleration of 50 basis points compared to 7.1 percent achieved in the previous year.
The gross value added (GVA) estimates show a similar trend. Real GVA growth for FY18 has been estimated at 6.4 percent versus 7.1 percent in FY17.
“I can think of many reasons why we may end up performing worse than the previous year. Of these, two are particularly important. The first is insufficient investments. Our share of gross fixed capital formation to GDP has been declining over the last six years and now stands at 31 percent. This is insufficient to bring about a steady-state growth of 7.5 percent to 8 percent. The second is the terrible state of our banks”, added Bajaj.