Writing off by Banks

The problem of banks having to write off NPAs has become so acute for India that even rating agencies have sounded alert. And it is not very difficult to figure out why. As per data from International Monetary Fund (IMF), Indian banks sport the least equity capital buffer amongst banks in Asia. This means that the Tier I (only equity) capital less net non performing assets is the least for banks in India. In the event of a deluge in NPA, the possibility of equity capital getting eroded is highest in the case of Indian banks. While the RBI is not yet calling NPAs a systemic risk for Indian banking, the problem is conspicuous in the case of few PSU banks.

Indian banks sport least capital buffer for writing off NPAs

Source: IMF