This one private bank has made private lender NPAs look worse than PSU banks

The deteriorating asset quality of PVBs in terms of the GNPA ratio is due to the reclassification of IDBI Bank Ltd as a private bank.

Non-performing assets of India’s banking sector declined after seven years in FY19 but the NPA of one private bank led the overall private banks’ cumulative NPA to further deteriorate. While the GNPA ratio of PSU banks improved from 14.6 per cent to 11.6 per cent, it worsened from 4.7 per cent to 5.3 per cent in FY 19, compared to a year ago. However, this had not been the case if IDBI Bank was not included in the private sector as its GNPA ratio is as high as 27.47 per cent, which is the highest among all the private and public sector banks.

“The deteriorating asset quality of PVBs in terms of the GNPA ratio is due to the reclassification of IDBI Bank Ltd as a private bank effective January 21, 2019; however, after excluding IDBI Bank Ltd, PVBs’ GNPA ratio declined, RBI said in its latest report on Trend and Progress of Banking in India 2018-19”.

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The Life Insurance Corporation of India (LIC) acquired 51 per cent of the total paid-up equity share capital of the IDBI bank during FY 19, after which, the RBI re-categorised IDBI Bank as a private sector bank for regulatory purposes with effect from January 21, 2019.

Private banks attracted a significant portion – 77 per cent – of the increase in term deposits, primarily reflecting the higher interest rates offered by them. This also led an upturn in credit growth. This is the reason why the share of private banks in incremental loans was 69 per cent in FY 19. However, despite this uptick, the high GNPA ratio of one of the banks in the private sector brought the bad face of the entire sector.

Meanwhile, during July-June 2018-19, while the most numbers of complaints in the private banks were registered against issues related to debit or credit cards but in IDBI Bank, most of the complaints were regarding non-observance of fair practices code.