The rapid growth in the balance sheets of banks SFBs has raised concerns about asset quality, especially in standard restructured loans. According to the FSR SFBs restructured standard advances are higher than pre-pandemic levels, although less than the peak of September 2021, the concentration of business in limited geographies and customer profiles is behind such development, according to the FSR SFBs. The share of restructured advances was about 3.5 per cent of the total advances as of March 2022.
SFBs aggregate deposits and credit rose by 32.7 per cent and 23.1 per cent during the four quarters of FY 22. The growth on advances has been 20 per cent and above in the last three financial years FY 20 through FY 22. The high balance sheet growth of SFBs comes on a low base. The total assets of the SFBs is one per cent of the total assets of the Scheduled commercial banks SCBs FSR said.
Karthik Srinivasan, group head financial sector rating, Icra, said at a broader level the restructuring level is high, something that needs to be watched for. Half of them have restructured loans higher than sectoral figures 3.5 per cent 4 -- 5 have less than two per cent. Things are not alarming and manageable.
About 15 -- 20 per cent of the recast pool has become non-performing. He said that these advances should start turning around from this fiscal year.
The gross non-performing assets of SFBs was 5 per cent at the end of March 2022, down from over 6 per cent in September 2021. In September 2021, their net NPAs fell from close to 3.0 per cent to 2.2 per cent in March 2022, FSR said.
Their Capital Adequacy Ratio was comfortably at 19.3 per cent in March 2022, which is higher than the larger group of SCBs, though their Provision Coverage Ratio PCR at 53.9 per cent was significantly less than other banking groups in the SCBs cohort.
SFBs provide a savings vehicle for underserved segments of the population and also meet the credit needs of small borrowers. They are expected to deploy 75 per cent of their Adjusted Net Bank Credit in priority sectors, with at least 50 per cent below 25 lakh.