Reserve Bank Deputy Governor SS Mundra on Wednesday said level of stressed advances in banking sector has risen to 12 per cent as gross non-performing assets nearly doubled to 8.7 per cent in June quarter.
System-level stressed advances, which includes GNPAs and restructured standard advances during March 2016, were 11.4 per cent, while they were 10.9 per cent as of March 2015.
Reeling out the numbers, he said stressed assets of public sector banks have jumped to 15.4 per cent in the June quarter as against 14.4 per cent in March 2016 and 13.2 in March 2015.
"The level of stressed advances, which include NPAs and restructured assets for the industry, is around 12 per cent, but for the public sector banks it is around 15.4 per cent as of June 2016," Mundra said at a banking event.
Gross non-performing assets of scheduled commercial banks almost doubled to 8.7 per cent in the quarter to June compared to 4.6 per cent in March 2015 and 7.8 per cent in March 2016, led by public sector banks.
The situation in public sector banks was the worst with their bad loans jumping to 11.3 per cent in June 2016 from 9.8 per cent in March 2016 and 5.4 per cent in March 2015, he said.
Private sector lenders' bad loans were at 2.8 per cent in June as against 2.7 per cent in March 2016 and 2.2 per cent in March 2015.
But the foreign players bettered their asset quality as their gross NPAs improved to 3.7 per cent in June 2016 from 4.2 per cent and 3.2 per cent, respectively in March 2016 and March 2015.
In the financial year to March 2016, banks' profitability dropped a whopping 59 per cent to Rs 32,285 crore from Rs 79,465 crore a year ago, hit by higher non performing assets.
State-run banks reported a net loss of Rs 20,006 crore in the financial year ended 2015-16 as against a profit of Rs 30,869 crore.
Private sectors players net profit marginally increased to Rs 39,672 crore in March 2016 from Rs 35,832 crore in March 2015. Foreign banks' profitability slightly declined to Rs 12,619 crore in March from Rs 12,764 crore last year.
"To be fair to the sector, some of the events were external and hence not in control of the bank management," Mundra said.
Provisions for bad loans soared 131 per cent to Rs 1,70,630 crore during 2015-16 from Rs 73,887 crore in 2014-15.
State-run banks' provisions for bad loans jumped 150 per cent to Rs 1,44,608 crore from Rs 57,842 crore.
Mundra said the recent performance of the banking sector has taught an unambiguous lessons that in the absence of strong structural and governance reforms, consistency of the performance would always remain susceptible to such events.
"There is a need for structural and governance reforms," he said, adding for the private sector banks such reforms have to be focused on misaligned incentives and compensation.