In bad debt cloud, silver lining for banks: Aam aadmi


AMID serious concerns over bad debts across corporate and SME (small and medium enterprises) segments, there is one bright spot for banks — the retail consumer.

The retail segment, comprising individual consumers, witnessed a reduction in gross NPA (non performing asset) rates for the country’s scheduled commercial banks over the last 18 months — from 5.3 per cent in March 2014 to 4.7 per cent in September 2015, a period when all the other segments saw their NPA levels soar, according to CIBIL (Credit Information Bureau India Ltd) data.

The lower NPAs has meant that there has been a 25 per cent surge in banks’ exposure to the retail segment during this period (calculated on a compounded annual growth rate basis). This dip has also played a role in counterbalancing the surge in bad loans for banks across other segments and keeping their overall NPA rate in check. The gross NPA rate for a scheduled commercial bank is defined as the gross NPA exposure divided by total exposure.

Retail banking, also known as consumer banking, refers to the services offered by a bank to individual consumers and includes savings and transactional accounts, mortgages, personal loans, debit cards, and credit cards. The NPA trends reflected in the CIBIL data is in line with the broader NPA trends reported by Reserve Bank of India (RBI).

Click here for more…