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Actual NPAs at 8-10% of bank assets?

Posted by fairval on July 31, 2012

Akash Prakash writes in today’s Business Standardhttps://fairval.wordpress.com/wp-admin/post-new.php?post_type=post

Many investors feel the true NPA picture (including restructured assets) would be in the region of 10-12 per cent of loan assets.

He further writes — As many former bankers point out, properly calculated, stressed assets for the banking system are already over 8 per cent of loans (a multi-decade high). This is based on the official NPA and restructured loan figures (adjusted for recoveries). Most investors continue to hear murmurs of rampant evergreening of loans, with a lot of anecdotal evidence pointing to asset quality being far worse than the reported numbers. (For example, I am aware of a very large infrastructure company which has not serviced any of its debts for over seven quarters now, yet is still not an NPA in any bank balance sheet.)

With Basel III coming up, and actual networth of banks (mostly PSU) considerably lower than reported, even loan funding will hit a road block. IPOs have been dead for a while, PE money is increasingly circumspect. The first rush of PE investors from 2006-08 period, are stuck with investments where holding periods are over, and exit overdue.

Does not look good for revival of investment demand.

 

 

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