No listed bank has even 1% net NPA: A milestone for asset quality | Expert

This is a rare milestone for the Indian banking industry. In the preceding March quarter, at least one lender (IndusInd Bank Ltd) had 1 per cent net NPAs.

What’s more, in the entire universe of listed Indian banks, only nine banks have half per cent or more (but less than 1 per cent) net NPAs – three public sector banks (PSBs) and six private banks. They are Bank of Baroda (50 basis points or bps), Bank of India (51 bps), City Union Bank Ltd (61bps), The Jammu & Kashmir Bank Ltd (60 bps), Punjab & Sind Bank (65 bps), DCB Bank Ltd (84 bps), Karnataka Bank Ltd (87 bps), Bandhan Bank Ltd (93 bps) and IndusInd Bank Ltd (95 bps). One basis point is one-hundredth of a percentage point.

On a quarter-on-quarter (QoQ) basis – comparing June quarter results with the March quarter – only four (three private banks and one public sector bank, or PSB) have seen higher net NPAs (in percentage terms), that too marginally. And, for seven of them (two private banks and five PSBs), there has been no change in net NPAs.

Bank of Maharashtra boasts the cleanest balance sheet with the lowest net NPA ratio at 13 bps, followed by Indian Bank (15 bps), IDBI Bank Ltd (16 bps), Tamilnad Mercantile Bank Ltd (17 bps), Federal Bank Ltd and Indian Overseas Bank (18 bps each) and Karur Vysya Bank Ltd (19 bps). These seven banks have less than 0.2 per cent net NPAs. Among the mega-lenders, State Bank of India (SBI) reported net NPAs of 38 bps, while HDFC Bank recorded 41 bps.

When it comes to gross NPAs, the scene is not that exciting. Only two banks – both private – have less than 1 per cent gross NPAs. They are Tamilnad Mercantile Bank (69 bps) and Karur Vysya Bank (74 bps). On the other end of the spectrum, two banks have more than 3 per cent gross NPAs. They too are private entities – IndusInd Bank (3.25 per cent) and Bandhan Bank (3.15 per cent). Five PSBs and four private banks have between 2.08 per cent and 2.78 per cent gross NPAs. SBI’s gross NPAs are 1.47 per cent while HDFC Bank’s sit at 1.17 per cent.

In absolute terms, gross NPAs of the listed banks are to the tune of ₹3.7 trillion in June, down 11.76 per cent from the year-ago period; and net NPAs are ₹84,293 crore, down 9.51 per cent. (All figures are rounded off.)

This steady depletion of bad debt, coupled with slowing fresh slippages, allowed banks to trim risk provisions. In the June quarter, total industry provisioning for bad debt fell to ₹25,448 crore—a sharp 41.61 per cent decline YoY. QoQ, however, there hasn’t been any significant change in the amount.

These lower provisions provided a direct boost to bottom lines. While the banking industry’s operating profit grew by a modest 4.5 per cent YoY, net profit surged 19.01 per cent to nearly ₹1.10 trillion – the highest ever quarterly profit – because of lower provisions. SBI led the profit ladder with ₹21,121 crore net profit, followed by HDFC Bank…