NPAs of banks may cross Rs 2 lakh crore

The net non-performing assets of the banking sector are expected to cross Rs 2 lakh crore (Rs 2 trillion) by the end of March 2013, from Rs 1.57 lakh crore (Rs 1.57 trillion) in June, mainly due to slowdown in the economy, industry body Assocham said on Friday.

"Issues of the asset quality and challenges of requisitioning additional capital to keep up growing business together with burgeoning twin deficits of fiscal and current account have collectively contributed to this dismal situation of increased NPA levels," it said.

It said that existing exposure of banks to poor performing sectors like power, aviation, highways, micro-finance institutions, ports and telecommunication have lead to high levels of stress assets.

Apart from this, growing slackness in

performance of SMEs and agriculture sector are signs enough to show that banks' NPAs are bound to rise, it added.

"The net NPAs of the banking sector are increasing at an alarming rate and may cross Rs 2 lakh crore (Rs 2 trillion) by the end of March 2013," Assocham said.

The non-performing assets of the banking sector rose sharply to 1.28 per cent in 2011-12 from 0.97 per cent a year ago due to high interest rate and slowdown in the economy.

The chamber also said slowing economic growth would also have a negative impact on asset quality of Indian banking industry.

It said that growing inability to raise adequate equity in a time-bound manner due to high volatility and depressed condition on capital markets is straining companies' balance sheets and financial flexibility of players, which has resulted in increased likelihood of restructuring.