India not that worried about banks’ NPAs—yet

The central bank says the rising level of non-performing assets isn’t too scary at the present time.

The Reserve Bank of India has met top bankers to assess the state of the industry’s growing load of NPAs that hit an all-time high US$8.1 billion in the third quarter of 2011.

State Bank of India chairman Pratip Chaudhuri was told the industry sectors under most threat from NPAs were textiles, steel, mining and aviation. Aviation was a particular concern with its NPAs ballooning to US$18 billion.

"One issue was how the NPA may pan out and by and large the feeling that the situation is very much under control," said Union Bank of India chairman and managing director M.V. Nair.

Another bank leader said there was a feeling that banks should not be complacent, but that the NPA situation is not something that is too scary.

Steadily increasing NPAs have been blamed for the continued interest rate increases imposed by the central bank. The higher rates have been blamed for India’s slowdown in economic growth. It has also forced most state-run banks to almost double their bad debt reserves.

The central bank increased its key rates a record 13 times in the 19 months until October 2011.