Kochhar says NPA crisis of banking sector over

As Indian banks battle a sharp rise in bad loans over the recent past, top banker Chanda Kochhar says that there could be some more addition to the non-performing assets for the industry during the current fiscal, but the worst appears to be over.

“There will be some addition to NPAs and the restructured assets to the banking industry, but I think these additions in FY14-15 should be less than the additions in FY13-14.

In that sense, we can assume that the peak is behind us and gradually now there should be an improvement,” ICICI Bank's Managing Director and CEO Chanda Kochhar said.

“On the retail side of the business, the quality of assets is very stable and payment track records, at least on secured business such as housing loan, car loan etc, are very satisfactory and so that part of the business is very stable.

“On the project side, in fact, one expects that as decision-making starts and as projects start getting last-mile clearances, any stress or tightness on cash flows should get lifted and the things should look better,” Kochhar said.

At the same time, Kochhar warned that the continuing stress on the corporate sector as a whole would still impact the cash flows and therefore the non-performing assents (NPAs) could still continue to rise, although at a slower rate than the last fiscal.

Reserve Bank Governor Raghuram Rajan had also said last week that the most immediate problem confronting the banking system was that of rising level of stressed assets.

“Fortunately in the last quarter those levels of stressed assets tapered off or flattened out. But, it is too early to declare victory,” Rajan said after the central board meeting of RBI in Chennai.

The problems related to NPAs are said to be relatively more severe for public sector banks. According to a recent RBI report, industries such as infrastructure, iron and steel, textiles, mining and aviation account for a significant share of total stressed assets (NPAs and restructured advances) of banks, especially those in the public sector.

“This is also reflected in the relatively lower profitability of public sector banks,” RBI said in its latest Financial Stability Report.