Bad loans have risen sharply in the banking system as net non-performing assets (NPA) of all banks have increased to 1.68% of total loans at the end of 2012-13 against 1.28% at the end of 2011-12, according the Reserve Bank of India (RBI).
Net non-performing assets of the 26 public sector banks, including State Bank of India (SBI), rose to 2.02% during the year compared with 1.53% in the previous fiscal. Net NPA of new private sector bank rose marginally to 0.45% compared with 0.42%.
Tight liquidity situation resulted in increase in cost of funds of all commercial banks to 6.12% against 5.90% in 2011-12.
“Cost of funds of all scheduled commercial banks increased during 2012-13,” RBI said in report titled ‘A Profile of Banks: 2012-13’.
As far as state-owned banks were concerned, the cost of funds rose to 6.27% from 6.06% in 2011-12.
Rise in cost of funds had its bearing on net interest margin (NIM) or interest spread of banks, which came down to 2.79% from 2.90% a year ago.
Public sector banks earned a net interest margin of 2.57% compared with 2.76% in the previous financial year.
Public sector banks earned a net interest margin of 2.57% compared with 2.76% in the previous financial year.