Bank non-performing assets likely to be at 4.4 per cent in FY14: Fitch
Mumbai: According to international rating agency Fitch, the asset quality woes of banks are unlikely to ease any time soon and the gross non-performing assets are set to inch up to 4.4 per cent this fiscal year from the likely reading of 4.2 per cent in 2012-13.
"Banks' latest results show a continued decline in the overall asset quality as the economic downturn persists...The central bank's recent rate cuts are unlikely to ease asset quality pressures to any great extent or help the banks correct their funding imbalances," the rating agency said in a note on Thursday.
It said infrastructure is the biggest risk for the banks during the fiscal year, which will see the gross bad assets ratio climbing up to 4.4 per cent from the 4.2 per cent estimated for FY13.
Some of the banks, including the largest lender SBI, are yet to announce their March quarter results, but the few public sector lenders which announced their earnings showed mixed bag on the asset quality front. However almost all the private sector lenders reported better quality in assets.
"The long-term nature of infrastructure assets leaves banks more exposed to asset/liability mismatches, particularly as deposit-gathering has not kept pace with credit growth," the report said.
Reliance on short-term funding like certificates of deposit and bulk deposits will remain high, Fitch note said, adding the larger banks with broader deposit and financing bases are better placed than the smaller ones in tackling the difficulties.
It said the growth in restructured loans will outpace those in NPAs, but added the pace of NPA accretion is slowing due to factors like policy easing by the Reserve Bank of India (RBI).
However, RBI's articulated concern on inflationary pressures and the twin deficit limits the scope for further easing from the 0.25 per cent cut in key rates delivered last week, it said.
Fitch, which along with its peer S&P had downgraded the rating outlook to negative last year, said, "key structural impediments" including availability of fuel, rising input costs and government clearances will be hard to tackle in the short-term.
However, if the recent measures of the government bear fruit, there is some cause for optimism in the medium-term, the report concluded.
"Banks' latest results show a continued decline in the overall asset quality as the economic downturn persists...The central bank's recent rate cuts are unlikely to ease asset quality pressures to any great extent or help the banks correct their funding imbalances," the rating agency said in a note on Thursday.
It said infrastructure is the biggest risk for the banks during the fiscal year, which will see the gross bad assets ratio climbing up to 4.4 per cent from the 4.2 per cent estimated for FY13.
Some of the banks, including the largest lender SBI, are yet to announce their March quarter results, but the few public sector lenders which announced their earnings showed mixed bag on the asset quality front. However almost all the private sector lenders reported better quality in assets.
"The long-term nature of infrastructure assets leaves banks more exposed to asset/liability mismatches, particularly as deposit-gathering has not kept pace with credit growth," the report said.
Reliance on short-term funding like certificates of deposit and bulk deposits will remain high, Fitch note said, adding the larger banks with broader deposit and financing bases are better placed than the smaller ones in tackling the difficulties.
It said the growth in restructured loans will outpace those in NPAs, but added the pace of NPA accretion is slowing due to factors like policy easing by the Reserve Bank of India (RBI).
However, RBI's articulated concern on inflationary pressures and the twin deficit limits the scope for further easing from the 0.25 per cent cut in key rates delivered last week, it said.
Fitch, which along with its peer S&P had downgraded the rating outlook to negative last year, said, "key structural impediments" including availability of fuel, rising input costs and government clearances will be hard to tackle in the short-term.
However, if the recent measures of the government bear fruit, there is some cause for optimism in the medium-term, the report concluded.
PM’s image hits new low as Sonia stands tall against ministers
by Sanjay Singh
The presence of Ahmed Patel, the Congress president’s powerful political secretary at the Prime Minister’s residence when Law Minister Ashwani Kumar and Railway Minister Pawan Kumar Bansal came to tender their resignations shouldn’t come as a surprise. Waiting until the Prime Minister accepted the resignations, Patel’s presence was part of a long sequence of events that included Congress president Sonia Gandhi reportedly demanding that the Prime Minister ensuring that the two ministers resigned.
While the Congress president’s statements are usually never leaked, in this case the fall guy turned out to be the Prime Minister for trying to shield and defend the indefensible. But didManmohan Singh actually defy the party president for so many days and defend his ministerial colleagues despite the irreparable damage caused to the public perception of the party and himself?
One theory is that given the slide the Congress’ image over the two issues, a dramatic intervention was required from Gandhi to resurrect her image as the ultimate saviour and moral compass of the Congress. Even if it meant that the Prime Minister had to be the fall guy.
This theory is given some credence by the resignation letter of former Railway Minister Pawan Kumar Bansal. While resigning, Bansal mentioned that he had offered to resign a day after his nephew Vijay Singla and Railway Board member Mahesh Kumar were arrested on charges of bribery. However, he says he was asked to wait.
Do the resignations do more harm to Manmohan’s image while harming Sonia’s? PTI
However, Congress party leaders now say that Gandhi intervened “decisively” when the crisis reached a peak while a dithering Prime Minister was unable to take a decision on his tainted colleagues.
Under the circumstances, Gandhi’s political rivals recall two instances when she managed to make the most out of an adversity, leaving the opposition dumbfounded. The first instance was when in 2004 she displayed “amazing grace” by relinquishing Prime Minister’s post and nominating Manmohan Singh for the post. The second incident was in 2006 when at the height of Office of Profit controversy, she resigned from Parliament only to be re-elected from Raebareli before Parliament could open for the next session. In both instances she preserved the image of being a virtuous and conscientious politician among her supporters inside and outside of the party.
But despite her coming out of this situation smelling of roses, what does it mean for the Prime Minister? His image has already taken a hit and he is now openly ridiculed. In this case, Ashwani Kumar had unrestricted access to the Prime Minister and his family and perhaps involved himself in modifying the CBI’s report with the sole purpose of protecting Singh. Bansal also was Singh’s choice for the important railway ministry. Apart from the hit his image has taken, the Prime Minister’s powers are also considerably limited thanks to the new power centre in the party in the form of Rahul Gandhi.
However, there will be no respite for the Prime Minister any time soon with the opposition unlikely to restrain its attack on him in any way in the coming days. Manmohan Singh‘s term as Member of Parliament (MP) expires on 14 June. The elections for the two Rajya Sabha seats in Assam, including one vacated by him will be held on 30 May. Though it would just be a formality, Singh has to file his nominations for re-election from Assam to Rajya Sabha by 20 May.
The opposition is now training its guns at the Prime Minister with renewed vigour.
“Now, there is no logic in the Prime Minister continuing. Having decided to drop the Law Minister who was protecting the Prime Minister, the consequences should follow. The consequence is that the Prime Minister must resign now,” veteran BJP leader LK Advani said.
The Opposition is also targeting the government for the delay in the minister’s resigning on the grounds that it could have saved a washed out session of Parliament.
“The resignation of the two ministers shows that our demand for their resignation was justified and the government was unnecessarily adamant. If they had accepted our demand for their resignations earlier, the Parliament session could have gone on on,” Leader of Opposition in Lok Sabha Sushma Swaraj tweeted.
Senior opposition leaders believe that the the ruling Congress created a situation of forced adjournments and move the Food Security Bill in the din so that it could go to town claiming that it cared for the poor, but an obdurate BJP was not letting its noble governance ideas be put in practice.
There may be some degree of truth in opposition’s charges. Ever since the controversy over the two ministers began, Congress leaders firmly believed that even if the party had to sack the one or both of these ministers it should not be seen as doing it under pressure from the BJP. The Congress wanted to take a moral position that it sacrificed its two important ministers to take the high ground on public probity. It’s another matter, if anyone actually believes the Congress. For now, the Congress is content with its projection of Sonia Gandhi as its saviour, again, no matter what it does for Manmohan Singh.
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