Most of the Rs 19,062 crore (Rs 190.62 billion) fresh non-performing assets added to gross NPAs of 33 banks in 2005-06 were on account of defaults in retail loans, bankers and analysts said.
In 2004-05, addition to gross NPAs of these banks 26 public sector banks, five private sector banks and two foreign banks was Rs 17,756 crore (Rs 177.56 billion).
Banking analysts said defaults in retail loans accounted for bulk of the addition to NPAs in 2005-06. The addition to NPAs in 2004-05 was spread across retail, wholesale and priority sector loans.
Fresh generation of NPAs in wholesale loans in 2005-06 was not large, as many bad and potentially bad accounts had gone through debt restructuring and the industry has, in general, been doing well for the last couple of years.
The retail loans boom started about three years ago and peaked in 2005-06, when banks disbursed a total of about Rs 1,86,700 crore (Rs 1867 billion) of loans for the purchase of homes, cars, commercial vehicles, consumer durables and two-wheelers and also for personal purposes.
HDFC Bank, in its 2005-06 annual report, said, "There has been an increase in NPAs in absolute terms during the year. Increases in NPAs during the year were primarily related to delinquencies in various retail loan products. These delinquencies and NPAs were within the expected levels for each of the retail asset products, given the seasoning of the retail portfolio."
Analysts said gross and net NPAs on March 31, 2006 do not reflect the additions during the year on account of write-offs and provisioning. Addition to net NPAs in 2005-06 in absolute terms was Rs 10,248 crore (Rs 102.48 billion) for 31 banks, 16.18 per cent more than Rs 8,820 crore (Rs 88.20 billion) a year earlier.
Paresh Sukthankar, country head, credit and market risk at HDFC Bank, said, "In our case, NPAs for various retail loan products remain in line with our expectations for each product programme and are among the lowest in the industry. HDFC Bank's overall portfolio quality remains healthy, with gross NPAs at 1.2 per cent and net NPAs at 0.4 per cent of customer assets, on March 31, 2006."
Addition to gross NPAs in 2005-06 in case of HDFC Bank was Rs 569 crore (Rs 5.69 billion) against Rs 258 crore (Rs 2.58 billion) a year ago.
The NPAs were mainly in retail portfolios, besides home loans. The bank only sources home loan customers for its parent Housing Development Finance Corporation the leading mortgage lender.
The RBI had in October 2005 increased the provisioning on standard assets to 0.40 per cent from 0.25 per cent. To ensure that asset quality is maintained in the light of high credit growth, the central bank in April 2006 further increased the general provisioning on standard loans in specific sectors to 1 per cent.
The specific sectors were personal loans, loans qualifying as capital market exposures, residential housing loans beyond Rs 20 lakh and commercial real estate loans.
The addition to IDBI Bank's gross NPAs in 2005-06 was 10 times the fresh NPA generation in 2004-05.
The addition amounted to Rs 1,883.2 crore (Rs 18.83 billion) against Rs 186.59 crore (Rs 1.86 billion) in 2004-05. The addition to the bank's net NPAs (NPAs after write-offs and provisionings) in 2005-06 was Rs 684.41 crore (Rs 6.84 billion) against Rs 144.52 crore a year earlier.
