Banks' bad loans could exceed Rs20,00,000 cr: K C Chakrabarty

The various projections of bad loans with the banking sector in India are only tips of the iceberg and the actual amount of problem assets of the banks could be more than thrice the figures put out bay banks and the banking sector regulator, says a former deputy governor of the Reserve Bank of India (RBI).

The total quantum of problematic loans in the Indian banking sector could be around Rs20,00,000 crore, much higher than what is reported by banks and estimated by the central bank and government, says K C Chakrabarty, former deputy governor of the Reserve Bank of India (RBI).

Meanwhile, according to official estimates, gross non-performing assets (NPAs), or bad loans, of state- owned banks surged 56.4 per cent to Rs614,872 crore during the 12-month period ended December 2016, and appear set to rise further in the next two quarters.

This is because many units, especially in the small and medium sectors, are struggling to repay after being hit by the government's decision to withdraw currency notes of Rs500 and Rs1,000 denomination, say reports.

Bad loans have now shot up by 135 per cent from Rs261,843 crore in the last two years and now constitute 11 per cent of outstanding loans, despite the Reserve Bank of India announcing a host of restructuring schemes.

He said unless the actual chunk of bad loans is recognised, bad loan resolution will be nearly impossible.

''I'll put the figure around Rs20,00,000 crore. It is not correct to say that NPAs are only Rs6 or 7 lakh crore. One should include all troubled loans including reported bad loans, restructured assets, written off loans and bad loans that are not yet recognised. Unless this portion is recognised first, there will be no solution to the bad loan problem,'' said Chakrabarty, in an exclusive interaction with Firstpost, on Monday.

As of December, the total gross non-performing assets (NPAs) of 42-listed banks in India stood at Rs7,30,000 crore. There is no accurate estimate of the total restructured loans and the amount of loans written off by banks. But, according to government data, for the fiscal year ended March, 2016, Indian public sector banks wrote off Rs59,547 crore, while in the three fiscal years prior to that (FY13, 14 and 15) banks had together written off Rs1,14,000 crore of loans.