Karnataka's PSBs stare at mounting bad loans

Public sector banks based in Karnataka are staring at a huge amount of bad loans as the recovery is far lesser than the new slippages.

Five public sector banks headquartered in Karnataka --  Canara Bank, Corporation Bank, Vijaya Bank, Syndicate Bank and erstwhile State Bank of Mysore (SBM) -- have seen a net increase of Rs 15,476 crore, an year-on-year growth of 22.2% in their gross NPAs during financial year ended March 31, 2017, according to data released by RBI.

The closing level of gross NPAs for five PSBs stood at Rs 85,152.9 crore, compared with of Rs 69,677 crore as on March 31, 2016.  

However, the net increase doesn't reflect the absolute number of new NPAs as its is adjusted for deductions and write-offs during the year. The new additions accounted for whopping Rs 38,694.9 crore during 2016-17, about 55.5% of the previous year's total. Write-offs amounted to Rs 11,618.6 crore during the year.  

"There have been several new guidelines introduced by RBI this year which seems to have contributed to this rise. It has been a financially unstable year and there has been less credit growth in the past year. The denominator hasn't increased much this year," said Sharad Sharma, former CEO and MD of SBM.

Vijaya Bank is the only bank in the country whose net NPAs have declined during the year. While the gross bad loans of the bank increased by 5.9% to Rs 6,381.8 crore, its net NPAs have come down by 3.7% to Rs 4,118.2 crore.

According to experts, Vijaya Bank has been curbing its exposure to the big ticket accounts, that has aided them in reducing the scale of NPAs.

Another city-based PSB, Canara Bank, has also faired well in asset quality management during the year, with a mere jump of 8.1% and 3.9% in gross and net NPAs during the year, respectively.

"Unfortunately, PSBs are seeing growth in retail loans as well now. This is mostly due to the lack of proper risk assessment mechanism," chairman of a PSB said on condition of anonymity.

The worst performer in the state has been erstwhile SBM, which has now been merged with SBI. The bank showed a whopping jump of 172.7% in gross bad debt, tripling the number to Rs 9,914.6 crore during the year. The new additions to the bank's bad loans pool during the year was Rs 8,249 crore, almost three times higher compared to Rs 3,635.6 crore, its gross NPA level at the beginning of the year.