Gross non-performing assets (NPAs) of the banking sector are likely to increase, O P Bhatt, chairman of the State Bank of India said yesterday.
He was speaking at the Bankers' Conference 2009-10 (Bancon), the annual banking conference in Mumbai organised by Indian Banks' Association (IBA) and SBI.
''NPAs in the banking system are increasing and may continue to rise for the next one-two quarters due to the lag effect,'' Bhatt said. He, however, said SBI has a provision coverage, or the ratio of a bank's total provisions to gross NPAs, of about around 40 per cent.
''If the assets under collection are included, under the new guidelines issued by the RBI, then the provisioning will increase to 58 per cent,'' he added.
In its mid-term credit policy review, RBI had said banks would have to attain a minimum 70 per cent coverage ratio by September 2010.
''RBI is rightly concerned if banks are providing enough for NPAs,'' Bhatt said. However, there should be a clearly defined method for calculating the coverage ratio, Bhatt said, adding that 70 per cent appeared arbitrary.