A report presented during a recent State Level Bankers’ Committee (SLBC) meeting said that Non-Performing Assets (NPAs) in Gujarat rose by more than 25 percent to Rs 39,289 crore in the last year, according to media reports. Defaults by MSMEs and corporates have contributed to NPAs, bankers say. They saw the loan defaults as effects of the demonetisation drive and the introduction of the Goods and Services Tax (GST).
The gross NPAs of banks in Gujarat were 6.88 per cent of the total loans, amounting to Rs 5,60,870 crore on September 30, 2018, the report added. This is in comparison with last year’s figures where bad loans stood at Rs 31,318 crore at the end of September 2017 - 6.39 percent of the gross advances.
The meeting was headed by Ramesh Singh, Executive Director, Dena Bank, who said, “Close to Rs 30,000 crore of NPAs in Gujarat are corporate loans. This also includes all loans over Rs 5 crore taken by MSMEs who fall in the priority sector for the banks. Many times, an account goes bad because there are factors beyond the control of the borrower. There are an equal number of people in the market who also misuse this facility. People take multiple loans on the same asset.”
Bad loans among MSMEs have risen by almost 35 percent in the last one year. NPAs among small entrepreneurs in Gujarat stood at Rs 8,526 crore, which is significantly larger that the NPAs worth Rs 6,321 crore last year. Singh added, “In Gujarat, the highest number of defaulters are in the MSME sector. For instance, there is a number of ginning mill loans that have turned into NPAs in Rajkot, where a number of banks are stuck. For Dena Bank, about Rs 200 crore of loans extended to ginning mills have turned into NPAs.”
Industry bodies such as the Gujarat Chamber of Commerce and Industry (GCCI) and Federation of Industries and Associations have voiced their concerns about the deteriorating health of the MSME sector and said that the production has dipped in the last 18 months. Further, it was estimated that there are Rs 2.5 lakh crore of corporate loans in Gujarat, of which about 11 percent are NPAs. Bankers added that all loans (both in priority and non-priority sectors) above Rs 5 crore are treated as corporate loans. The State government is looking to attract major investments in the Vibrant Gujarat summit in January, 2019.