Ashika Monthly Insight August 2016

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AUGUST 2016 ECONOMIC REVIEW NGNF listed companies: ‘Weak’ companies – current trend (2013-14 to 2015-16) Although, the asset quality of the SCBs deteriorated substantially between Sep 2015 and March 2016, restructured standard advances ratio also reduced sharply from 6.2% to 3.9% during the same period. Sharp reduction in restructured standard advances actually helped in arresting the deterioration in overall stressed advances ratio and it rose marginally to 11.5% from 11.3% during the period. A spike in NPAs together with decline in restructured loans implies that the AQR mechanism has actually been working. Besides, this also implies that the restructured loans of yester years which have been kept as standard with “band-aids” are actually NPAs. Thus, in the nutshell, marginal increase in overall stressed advances implies that a substantial portion of the restructured loans have been shifted to NPAs. PSBs continued to hold the highest level of stressed advances ratio at 14.5%, whereas, both private sector banks (PVBs) and foreign banks (FBs), recorded stressed advances ratio at 4.5%. After the implementation of AQR, the banking sector GNPAs showed a sharp y-o-y increase of 79.7% in March 2016. Large increases were observed across different bank-groups. From chart (YoY Growth of GNPAs), it is pretty evident that the rise in NPAs has been very steep for PSBs followed by PVBs and then FBs. Moreover, from probability density function, it can be deduced that increasing proportion of restructured advances are reckoned as non-performing. YoY Growth of GNPAs Sector-wise, the industrial sector showed a decline in the stressed advances ratio from 19.9% to 19.4% between September 2015 and March 2016, though the GNPA ratio of the sector increased sharply to 11.9% from 7.3%. Further, among the major sub-sectors within the industrial sector, ‘basic metal and metal products’ accounted for the highest stressed advances ratio as of March 2016 followed by ‘construction’ and ‘textiles’. It is notable that the stressed advances ratio of the ‘infrastructure’ sector declined to 16.7% from 21.8% between September 2015 and March 2016. 34
STRONG ON CONSUMPTION Asset quality in major sector (%) Stressed advances ratios of major sub-sectors within industry (% of advances of their respective sector) Annual slippages of major sectors/sub-sectors (as on December 2015) on the other hand show that the textiles industry had the highest number of standard accounts slipping into the NPA category at 8.8%, followed by the cement industry at 8.0%. In terms of outstanding amounts, the iron and steel industry saw the highest slippages at 7.8% followed by textiles at 6.4%. While the government and the RBI is together taking various steps to address the issues plaguing the stressed sectors, the demand environment is still yet to recover. Overall slippage ratio based on amount outstanding was 3.2%. Annual slippage of standard accounts to NPA category-Sector wise (January to December 2015) Overall share of large borrowers’ in total loans increased from 56.8% to 58.0% between September 2015 and March 2016. Besides, their share in GNPAs also increased from 83.4% to 86.4% during the same period. The GNPA ratio of large borrowers increased sharply from 7.0% to 10.6% during September 2015 to March 2016 and the increase was evident across all bank groups. In this respect, PSBs recorded the highest GNPA ratio at 12.9%. On the other hand, SMA-2 ratio (SMA-2: Principal or interest payment overdue between 61-90 days) of large borrowers declined across bank-groups during the same period. On the other hand, the share of standard advances in total funded amount outstanding of large borrowers declined from 84.1% to 83.2% between September 2015 and March 2016. 35
Page 1 and 2: August, 2016 Market Overview Monthl
Page 3 and 4: STRONG ON CONSUMPTION Strong influx
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Page 31 and 32: STRONG ON CONSUMPTION Cloud service
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Page 39 and 40: STRONG ON CONSUMPTION Macroeconomic
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Page 53 and 54: STRONG ON CONSUMPTION Ashika Genera
Page 55 and 56: STRONG ON CONSUMPTION Key takeaways
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Page 67 and 68: STRONG ON CONSUMPTION Research Team

Ashika Monthly Insight August 2016

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