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Banks focus on a few states creating bad loans: Cibil

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The highest NPAs, of over 15 per cent, are in leather, textile and steel industries

Banks concentrating on a few states has led to rising loan defaults (giving up of loan repayment) and non-payments in micro as well as small and medium enterprises (SMEs), a report by TransUnion Cibil said on Thursday.

"Focusing on a few states deprive the lenders of an opportunity to exhibit calibrated loan growth. Currently, some banks tend to have analytical and strategic focus on five or at most 10 states and may not be fully sensitive to industry credit profile divergences," TransUnion Cibil India managing director and chief executive Satish Pillai said.

He cited Rajasthan, which has the lowest non-performing assets (NPAs or bad loans) for commercial loans at two per cent, but also the lowest concentration of loans.

According to the report, the NPA rate in micro enterprises has been range-bound between 6 and 6.5 per cent, but the SME segment shows a worrying trend in terms of loan quality, as NPAs have grown to 11 per cent from eight per cent of loans made earlier.

"The credit industry has been focusing on the micro and SME segments to overcome the challenges of commercial loan growth blues. But, the NPA trends in these two segments will also have to be monitored," it said. It said real estate and construction businesses have observed significant high NPAs of over six per cent each, but also witnessed loan growth of 11 and 14 per cent, respectively.  

The highest NPAs, of over 15 per cent, are in leather, textile and steel industries, it said.

The state-run banks' share in SME loans has gone down with the private sector lenders growing in this segment.

25TH NOVEMBER, 2016, THE BUSINESS STANDARD, NEW DELHI

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