Increasing bad loans, fall in their recovery a problem for banks: RBI

New Delhi, Aug 30  The problem of bad loans for the banking sector is significant when one looks at the increase in stressed assets and the falling recovery of bad loans, said a senior Reserve Bank of India (RBI) official on Tuesday.

Any bank that does not have a strong risk management system will have a highly susceptible credit portfolio, said RBI Deputy Governor N.S.Vishwanathan at the inauguration of the national conference on 'Risk Management-Key to Asset Quality,' organised by The Associated Chambers of Commerce and Industry of India (Assocham).

"The total stressed assets of public sector banks have risen to 14.5 per cent as at the end March 2016. They still contain some element of restructured assets indicating potential for some more pain, albeit of lesser intensity.

"With the annual recovery in NPAs (non-performing assets) falling from 20 per cent in 2013-14 to nine per cent in 2015-16, the problem assumes greater significance," he added.

According to Vishwanathan, there may not be big addition to NPA in the coming period as it would moderate but the provisioning needs as the NPAs age will put pressure on a bank's profit and loss account.

Noting risk management is not static and evolves over a period of time, he said risk management sophistication grows with the growth in the complexities of a bank's functioning.

Vishwanathan said the government has notified the amendment to the Debt Recovery Tribunal Act and SARFAESI Act which will speed up the debt recovery process, while the RBI has issued guidelines to make large borrowers to go to capital market for part of their funding needs.