Non-performing assets (NPAs) have plagued the Indian banking system over the years, prompting the Reserve Bank of India (RBI) to initiate swift measures to recover money from the top 12 defaulters who owe a whopping sum to banks. In sharp contrast, the situation is quite healthy when it comes to non-banking financial companies (NBFCs), reveals data.
Statistics put out by the Central government on Friday showed that NBFCs not only have low NPA levels, but have shown improvement over the past three financial years as against banks that are grappling with rising bad loans that have hit their lending capacity.
For the financial year 2016-17, the gross and net NPAs of NBFCs as a percentage to total advances stood at 4.40 percent and 2.30 percent, respectively, lower than 4.60 percent and 2.50 percent in 2014-15 and 2015-16, according to a statement by Santosh Kumar Gangwar, Minister of State for Finance in a written reply to a question in Lok Sabha on Friday.
This, despite an increase of 16.4 percent in lending for the financial year 2016-17 by the 11,517 NBFCs, according to the minister's reply.
Some of the listed NBFCs include Sundaram Finance, Bajaj Finance, GRUH Finance, GIC Housing Finance, LIC Housing Finance and M&M Financial Services.
LIC Housing Finance reported 15.2 percent YoY increase in net profit to Rs 470 crore on 9 percenr rise in revenues to Rs 3,633 crore for the quarter (Q1) ended June 2017. GRUH Finance saw its Q1 net profit grow 20 percent YoY to Rs 72 crore.
On the other hand, the bad loan scenario in the banking system is grim, prompting the central bank to move quickly against large defaulters as a first step.
For 2015-16, the gross NPAs of scheduled commercial banks stood at 5,41,763 crore, or 7.43 percent, of the total advances at Rs 72,86,952 crore. The gross NPAs spiked from 4.62 percent in the preceding fiscal, according to data released by the government a few months ago.
"Main reasons for increase in NPAs of banks are sluggishness in the domestic growth during the recent past, slowdown in recovery in the global economy and continuing uncertainty in the global markets," the minister had said in a reply to Lok Sabha in July last year.
The situation was worse for public sector banks that reported gross NPAs of 9.32 percent for 2015-16 and 5.43 percent in the preceding financial year.
The details for the financial year ended March 2017 are not available while data for the nin-month period ended December 2016 showed that bad loans of public sector banks rose over Rs 1 lakh crore to Rs 6,06,911 crore, according to data released in March this year.