Mumbai: Bad loans continued to pile up at both state-owned and private sector banks in the fiscal second quarter, almost doubling from the year-earlier period.

Thirty-seven of the 39 listed banks that have so far reported earnings for the quarter ended September saw aggregate gross non-performing assets (NPAs) rise to Rs6.49 trillion, according to data compiled by Mint.

This was a 97.13% increase from the Rs3.29 trillion reported by this set of banks in the same quarter a year ago. The latest numbers are also 6.63% higher than the Rs6.09 trillion of NPAs at these banks in the June quarter.

Although gross NPAs at public sector banks grew at a slower pace in the September quarter, bad loans at private sector banks surged.

Public sector banks’ gross NPAs rose 4.98% from the June quarter to Rs5.83 trillion in the September quarter. Bad loans at private sector lenders totalled Rs66,314 crore at the end of September, a 23.69% increase from the June quarter.

“ICICI Bank Ltd and Axis Bank Ltd have a large watch list (of potential bad loans) and a lot of slippages have come from that, contributing to private sector NPAs," said Siddharth Purohit, senior banking analyst, Angel Broking Ltd.

“Public sector banks did a lot of recognition in quarter three and quarter four (of the previous fiscal) in the asset quality review process; so the incremental slippages will not be of that high magnitude, though slippages will be high for public sector banks in the coming two quarters, which will not be a negative surprise," Purohit added.

A 11 November Angel Broking report noted that although slippages remained high, a large part of the new bad loans came from ICICI Bank’s watch list. For the next few quarters, ICICI Bank’s earning growth will be under pressure as new bad loans pile up.

ICICI Bank’s gross NPAs made up 6.82% of its loan book at the end of the September quarter, up from 5.87% a quarter ago. The bank’s net profit growth was suppressed to just 2.38%, and that was thanks to the sale of shares in its life insurance arm.

Aggregate deposits grew 5.71% to Rs101.43 trillion on a quarter-on-quarter (q-o-q) basis and 11.3% on a year-on-year (y-o-y) basis. Bank credit grew 3.65% on a q-o-q basis to Rs75.2 trillion and 10.4% on a y-o-y basis.

The highest increase in gross NPAs was seen at State Bank of India (SBI) associates. State Bank of Bikaner and Jaipur, State Bank of Mysore and State Bank of Travancore reported an increase in bad loans of 67%, 66% and 23% from the preceding quarter, respectively.

In June, the Union cabinet approved the merger of State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala, State Bank of Travancore and Bharatiya Mahila Bank Ltd with SBI.

Thirty-one of the 37 banks that have reported earnings have seen gross NPAs rise q-o-q, show data compiled by Mint.

The starkest example was Indian Overseas Bank, which reported a gross NPA ratio of 21.77% against 20.48% in the June quarter. Other banks which saw a jump in gross NPAs includes United Bank of India, where gross NPAs rose to 16.26% in the September quarter from 14.29% at the end of the June quarter. At Bank of Maharashtra, the gross NPA ratio rose to 14.08% from 12.64% at the end of the June quarter.

IDBI Bank’s gross bad loan ratio rose to 13.05% in the September quarter compared with 11.92% in the June quarter.

The government last week announced the scrapping of Rs500 and Rs1,000 notes in a crackdown on black money. It has given people time until 30 December to deposit high-value notes at banks. Analysts say this will lead to an increase in bank deposits. “Public sector banks will get a little higher amount of deposits because of semi-urban and rural presence, but it will be important to see how much will be retained," said Purohit.

SBI expects loan recovery to pick up later this fiscal.

“Visibility of recovery is much greater in large value accounts, compared with a quarter ago. Focus on recovery has not shifted and will not shift," said Arundhati Bhattacharya, chairman of SBI, on Friday.

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