NPA-ridden Punjab National Bank has outperformed the Sensex since January 2017

Punjab National Bank accounts for a staggering 13.2% of the total amount owed to public sector banks by wilful defaulters. As per PTI reports, the bank had 1,120 wilful defaulters having outstanding non-performing assets (NPAs) or bad loans of Rs 12,278 crore in FY 2016-17. These numbers may be jaw dropping, but that has not deterred the Punjab National Bank’s stock to post returns of 23% in the year so far. This is despite the recent correction which has caused the stock to shed more than 8% in the last one month. The equity benckmark Sensex is up by 18% in the year so far. The stock was trading at Rs 142.9 on Monday morning. In comparison, country’s largest lender SBIaccounts for over 27 per cent of the total amount owed to public sector banks by wilful defaulters. As many as 1,762 wilful defaulters owed Rs 25,104 crore to State Bank of India as on March 31, 2017, according to PTI reports. State Bank of India has underperformed the Sensex with returns of 11.39%. The bank’s stock has shed more than 8% in the last three months. In fact SBI has underperformed the Sensex in 3-year, 5-year and 10-year periods.

Together these two banks account for Rs 37,382 crore or 40 per cent of the total outstanding loans. Total outstanding loans due to public sector banks by wilful defaulters amounted to Rs 92,376 crore, according to the Finance Ministry data.

As per PTI reports, 27 public sector banks, including SBI and its five associates had written off Rs 81,683 crore, the highest in the last five fiscals during 2016-17. The amount was 41 per cent higher than that in the previous fiscal. Gross NPAs of the public sector banks rose to Rs 6.41 lakh crore at the end of March 2017 as against Rs 5.02 lakh crore a year ago.

The central government and the Reserve Bank of India are working on a recapitalisation plan for public sectors banks reeling under massive stressed assets, RBI governor Urjit Patel said on Saturday. Pointing out that the state-run banks will need to take haircuts on current exposures under any resolution plan within or outside the Insolvency and Bankruptcy Code, Patel said higher provisioning requirement will affect the capital position of several banks. “This would necessitate a higher recapitalisation of these banks. The government and the Reserve Bank are in dialogue to prepare a packet of measures to enable the public sector banks to shore up the requisite capital in a time-bound manner,” Patel said at a conference on insolvency and bankruptcy in Mumbai. “Gross NPA ratio of the banking system at 9.6% and stressed advances ratio at 12% as of March 2017 is indeed a matter of concern,” Patel said.