Net Non-Performing Assets (NNPAs) of SCBs reduced by 34.7% y-o-y to Rs 1.25 lakh crore as of June 30, 2023, said a report by CareEdge on Tuesday.
The NNPA ratio of SCBs reduced to 0.9% from 1.6% in Q1FY23 which is an all-time low, it added.
While the Gross Non-Performing Assets (GNPAs) reduced by 25.6% y-o-y to Rs. 5.32 lakh crore as of June 30, due to lower slippages, steady recoveries & upgrades and write-offs.
The GNPA ratio of SCBs reduced to 3.7% as of June 30, 2023, from 5.7% over a year ago.
Gross NPAs dropped in Q1FY24, despite a healthy growth of advances of 16.7% y-o-y in the same period.
For the same period last year, NNPAs were at Rs 1.91 lakh crores. SCBs created provisions of Rs. 1.35 lakh crore from Q2FY23 to Q1FY24 compared to Rs 1.46 lakh crore from Q2FY22 to Q1FY23.
How Public Sector Banks performed?
The report stated that the NNPAs of PSBs reduced by 36.2% y-o-y to Rs 0.95 lakh crore as of June 30.
As of March 31, 2018, the NNPA ratio stood at 6% in FY18 which dropped to 0.9% as of June 30, 2023.
It was attributed to an overall improvement in asset quality due to healthy recoveries, lower slippage, write-offs, creating provisions and more resolution & settlement with IBC 2020.
GNPAs of PSBs reduced by 23.8% y-o-y to Rs. 4.05 lakh crore as of June 30 as slippages reduced significantly whereas write-offs were steady during the year and healthy recoveries & upgrades.
Within this, other PSBs’ GNPAs reduced by 26.9% y-o-y to Rs 1.36 lakh crore for the same period.
PSB slippages declined by 27.1% y-o-y to Rs 0.26 lakh crore in Q1FY24. Whereas write-offs and recoveries were stable at Rs 0.22 lakh crore and Rs 0.20 lakh crore in the quarter.
Absolute stock of GNPAs has shown a consistent improvement over the last two years as the reduction in the absolute stock of GNPAs along with rising advances has led to the GNPA ratio of SCBs reducing to 3.7% as of June 30, from 5.7% a year ago, and 7.6% as of June 30, 2021.
PSBs GNPA ratio reduced by 240 bps y-o-y to 4.6%, within this large PSBs reduced by 360 bps y-o-y to 6.3%.
How Private Sector Banks performed?
NNPAs of Private Sector Banks (PVBs) reduced by 29.4% y-o-y to Rs. 0.3 lakh crore as of June 30, 2023, within this the major reduction came from other PVBs which dropped by 38.1% y-o-y to Rs. 0.17 lakh crore.
NNPAs of PVBs showed an increasing trend in Q1FY24 on a q-o-q basis, increasing by almost 3.8% during the quarter.
GNPAs reduced by 30.8% y-o-y to Rs. 1.27 lakh crore as of June 30, 2023. This was driven by other PVBs wherein their GNPAs reduced by 47.8% y-o-y to Rs. 0.58 lakh crore. While large PVBs’ GNPAs reduced by 4.4% y-o-y in the same period.
Credit cost for SCBs
SCBs credit cost declined by 11.3% y-o-y to Rs 0.29 lakh crore in Q1FY24 as the banks especially PSBs already hold a substantial buffer for provisions along with improvement in the asset quality which has necessitated lower incremental provisioning in the quarter, the CareEdge report stated.
Credit cost of SCBs declined by 16 bps to 0.52% in Q1FY24 and it has been generally trending down from 1.44% in Q4FY21.
For PSBs, it reduced by 20 bps to 0.54% in the quarter, while for PVBs, it marginally dropped by 3 bps to 0.49% in the same period. Credit cost has witnessed a significant reduction over the last 6-8 quarters due to holding a substantial buffer for provisions and improvement in asset quality.
PSBs provisions dropped by 19.8% y-o-y to Rs. 0.19 lakh crore in Q1FY24, within this large PSBs reported a major drop in provisions for the quarter. PVBs provisions rose by 9.7% y-o-y in the quarter as it made standard provisions for growth of advances.
The report further stated that the credit offtake experienced robust growth of 16.2% in Q1FY24 and the outlook remains positive for FY24, driven by economic expansion, increased capital expenditure, the implementation of the PLI scheme, and a push for retail credit.
CareEdge estimates that credit growth is likely to be in the range of 13.0%-13.5% for FY24, excluding the impact of the merger of HDFC with HDFC Bank.
