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Several Banks At Severe Risk: Low CAR & High GNPA

Several Indian banks e.g. Bank of Maharashtra, IDBI, UCO, United Bank, CBI, Dena, Allahabad Bank are at very high risk.

We created a small framework to categorize most of the PSU banks and a few large private sector banks in potential risk they faces due to very high Gross NPA% and low Capital adequacy ratio. The NPA in itself puts a stress on the CAR because of the degradation of the asset quality and at the same time the banks are due for stricter CAR norms for Basel III  (which are gradually getting in-force as per RBI notifications earlier). 

For categorization of the GNPA & CAR, we considered the following:






Then we classified all the banks, based on their FY1617 Q3 figures, their relative position in a 5X5 graph. The graph immediately shows the banks which are at most risk. Categorized as RED, ORANGE & YELLOW with decreasing risk. GREEEN denotes best situation.

The banks at highest risk are : Bank of Maharashtra, IDBI, UCO, United Bank, CBI, Dena, Allahabad Bank. The reason for putting high GNPA & low CAR as highest risk is elaborated in our earlier detailed article on NPA.

What it means for these banks is that they have to quickly get their acts together to recover dues/ restructure/ write-off, get capital infused or become a potential candidate for future consolidation with the safer PSU banks. Time is running out and many of them have been mandated by RBI & GOI to provide Q-o-Q improvement. The ORANGE ones has to ensure that they move towards YELLOW and not risk further by deteriorating to RED.

To the ones, interested in the actual data, the following graph with table may be interesting.


Individual bank Q3 FY1617 results/ investor presentations

Randomwalks analysis

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