New Delhi, August 13: At the current round of bankers’ survey conducted by the FICCI-IBA around 55 per cent of reporting public sector banks (PSB) have cited a reduction in non-performing asset (NPA) levels. The survey presented an improved picture of the changing trend in NPAs with the proportion of respondent banks citing a reduction in NPAs at 52 per cent as against 43 per cent in the previous round.
Amongst the respondents stating infrastructure as high NPA sector, about 63 per cent have reported a decline in NPA in this sector during the last six months. Likewise, 57 per cent of respondents citing engineering goods as high NPA sector have mentioned a reduction in NPA levels in this sector, and about 92 per cent of those indicating metals like iron and steel as high NPA sector have indicated a decline in NPAs in that sector over the last six months.
With the formation of new government at the Centre, bankers were asked to identify some of the key priorities that government should focus on to address the major challenges being faced by the economy today. A large number of participating bankers have mentioned that addressing agriculture distress should be the top priority for the government. This would require undertaking reforms in the sector and strengthening the agricultural value chain.
The ninth round of the FICCI-IBA survey was carried out for the period January-June 2019. A total of 23 banks including public sector, private sector, foreign and small finance banks participated in the survey. These banks together represent over 67 per cent of the banking industry, as classified by asset size.
For the financial sectors, participating bankers were of the opinion that there should be capital infusion in public sector banks and measures should be taken to address the stress in the NBFC sector. These responses were received just before the release of the Union Budget 2019-20 and in-fact, the Union Budget did lay a special emphasis on the banking and financial sector, including capital infusion of Rs 70,000 crore into public sector banks and the proposal to provide one time six months' partial credit guarantee to PSBs for first loss of up to 10 per cent for purchase of high-rated pooled assets of financially sound NBFCs. These measures should help in addressing the liquidity constraint and ensure greater lending to support growth.
From February to June 2019, RBI has done three consecutive repo rate cuts of 25 bps each. As per the survey, 48 per cent of the responding banks reduced the marginal cost of funds based leasing rate (MCLR) by upto 20 basis points (bps) during the last six months. In case of term deposits above one year, 39 per cent of the responding banks have decreased interest rates by upto 50 bps while 30 per cent have not changed the rates. For term deposits below one year, majority respondents (57 per cent) have not changed the interest rates, while 22 per cent have reduced it by up to 50 bps.
While a large majority of respondent banks (70 per cent) reported a rise in share of cash account savings account (CASA) deposits in the first half of 2019, this is lower as compared to 78 per cent of respondents received in the last round of the survey.
In terms of the composition of loans and advances, there has not been any change observed in the current round as compared to the previous round of the survey. The share of retail loans has been 45 per cent while that of corporate loans has been 55 per cent as was the case in the preceding round.
Some of the key sectors that are expected to see higher credit in the next six months as identified by participating bankers are infrastructure, metals, real estate, auto & auto components, pharmaceuticals and food processing.