Latest news with #PSBs'
Indian Express
29-07-2025
- Business
- Indian Express
Public sector banks' MSME bad loans falling, Finance Ministry tells Rajya Sabha
India's public sector banks (PSBs) have been seeing a steady improvement in their MSME loan book – or loans given to Micro, Small, and Medium Enterprises – although credit extended to the smallest of these businesses has not witnessed a reduction in stress at the same rate, data shared by the finance ministry with the Parliament on Tuesday showed. Responding to a written question in the Rajya Sabha, Minister of State for Finance Pankaj Chaudhary said that the gross non-performing asset (NPA) ratio of PSBs' MSME loans had declined to 6.18 per cent as at the end of 2024-25 from 7.99 per cent a year ago and 12.8 per cent at the end of March 2022. The fall in the gross NPA ratio was due to both, an increase in the loans extended to MSMEs as well as a fall in the absolute amount of bad loans. The gross NPA ratio is calculated by dividing the quantum of loans gone bad – loans that are not being paid back – by the total amount of loans outstanding. For instance, loans given by state-owned banks to MSMEs stood at Rs 13.07 lakh crore as on March 31, up 11.3 per cent year-on-year. At the same time, the value of these loans that had become non-performing – or were not being repaid – was down 14 per cent from a year ago at Rs 80,749 crore. While the absolute amount of PSBs' bad loans within the MSME sector is down 22 per cent compared to March 2023, the decline has primarily been driven by small and medium enterprises. As on March 31, bad loans to small enterprises stood at Rs 19,677 crore, down 28 per cent year-on-year and 39 per cent from March 2023. For medium-sized enterprises, PSBs' bad loans stood at Rs 8,553 crore as at the end of the last financial year, down 30 per cent year-on-year and 46 per cent compared to two years ago. However, the decline in NPAs for micro enterprises has been considerably smaller. This is a worry as the quantum of bad loans among micro enterprises is much higher. As per the data, PSBs' bad loans to micro enterprises stood at Rs 52,519 crore as at the end of 2024-25, down 3 per cent year-on-year and 7 per cent compared to March 2023. '…the incidence of NPAs in lending by banks, inter alia in the MSME sector, is attributable to a number of factors, which include overall performance of the borrowing entity, macroeconomic conditions, sectoral issues, global business environment, etc,' Chaudhary said in his response on Tuesday. Lending to micro enterprises has been a problem for the entire industry, but particularly for state-owned banks. The Reserve Bank of India (RBI) last month said in its most recent Financial Stability Report that credit to these micro enterprises, which formed 49 per cent of total MSME credit, saw weaker incremental growth in 2024-25 compared to small and medium businesses. 'In terms of amount outstanding, the share of sub-prime borrowers in the MSME portfolio of the SCBs (scheduled commercial banks) has decreased from 33.5 per cent in June 2022 to 23.3 per cent in March 2025. PSBs, however, had a higher share of sub-prime borrowers in their MSME portfolio compared to PVBs (private banks) and NBFCs (non-banking financial companies),' the RBI had said. A sub-prime borrower is one who is viewed as a risk due to a non-existent or poor track-record of paying back loans. Siddharth Upasani is a Deputy Associate Editor with The Indian Express. He reports primarily on data and the economy, looking for trends and changes in the former which paint a picture of the latter. Before The Indian Express, he worked at Moneycontrol and financial newswire Informist (previously called Cogencis). Outside of work, sports, fantasy football, and graphic novels keep him busy. ... Read More
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Business Standard
23-06-2025
- Business
- Business Standard
PSBs' loan growth to outpace private banks in FY26: Fitch Ratings
PSBs' loans grew by 12.4 per cent while private peers lagged with 7.5 per cent in FY25 Mumbai The loan book of public sector banks (PSBs) will continue to swell faster this financial year than that of private peers, which are grappling with asset quality pressures in unsecured portfolios and elevated loan deposit ratios (LDRs), rating agency Fitch said on Monday. PSB's loan book is estimated to grow at 12 to 13 per cent, while private lenders will expand their portfolio by about 10 per cent in the financial year 2026 (FY26), Saswata Guha, senior director, Banks, Fitch Ratings said. PSBs' loans grew by 12.4 per cent while private peers lagged with 7.5 per cent in FY25. 'We expect sector loan growth to rebound to 12 to 13 per cent in FY26 on accommodative monetary policy and easing funding conditions. However, improved deposit mobilisation will be needed to preserve rated banks' nearly 120 basis points (bps) improvement in LDRs in FY25, as deposit growth converged with -- or in some cases exceeded -- lending growth,' it added. Referring to financial profile, Fitch observed the sector reported improved asset quality, stronger capital buffers and stable profitability despite the slowest sector loan growth in four years. Banks can sustain steady performance across most credit metrics in FY26, except for earnings due to cyclical pressures on margins and credit costs. The sector's impaired-loan ratio fell by about 60bp to 2.2 per cent in FY25. Although write-offs and recoveries were lower than in previous years due to a shrinking stock of legacy bad loans, they remained sufficient to largely offset bad loan additions. The private banks reported higher bad loan formation, though all banks saw net improvements. Fitch-rated banks maintained 80 per cent loan loss coverage. The impaired-loan ratios and credit costs for most banks have bottomed. Some banks may still improve given scope for write-offs in legacy bad loans that will further reduce the bad loan stock. This and higher loan growth could reduce the sector's impaired-loan ratio by 20bp in FY26, it added.
