Growing NPAs in Banks: Growing NPAs in Banks: Efficacy of Ratings, Accountability & Transparency of Credit Rating Agencies 31st May 2014 Presented by : Jagannadham Thunuguntla, Strategist & Head of Research SMC Global Securities

Big Mistake by US Banks – Unacceptable leverage levels 33 : 1 28 : 1

Acceptable Solvent NPA Acceptable Solvent NPA : 3% of the assets

Collapse of Lehman Brothers

Average Indian Bank’s Leverage : 10 times Average Indian Bank’s Leverage

Solvent NPA : 10% of the Assets Solvent NPA for Indian banks

Gross NPAs of Indian Banks Percentage (%)

Factors Contributing to NPA’s Poor Credit discipline Inadequate Credit & Risk Management Diversion of funds by promoters Funding of non-viable projects Inadequate mechanism to gather and disseminate credit information amongst commercial banks

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