Can We Really Bank On Our Banks?

Amidst all the banking chaos these days, there is so much fuss and worry around.

Thought of coming up with a basic understanding in simple words so that one can keep a regular monitor on whether our money is safe with the bank we have our account with.

Then, thought of sharing it here.

There are many ratios you can track in order to gauge the health of a bank.

But from the perspective of banks getting shut due to their loaning policies, these 3 ratios can be benchmarked:

• Gross NPA Ratio: (Gross NPA / Total Advances) X 100 (higher it is, bad it is).
• Net NPA Ratio: (Net NPA / Total Advances)  X 100 (higher it is, bad it is).
• Return on Assets: (Profit after tax / Average total assets) X 100 (higher it is, better it is).

For example, Bank of India (BOI) with which I have one of my accounts, has a gross NPA of 15.84%.

This is not so great.

Its Net NPA was INR 19,118.95 Crore and thus, its Net NPA ratio stood at 5.61%.

The bank's ROA is -0.84, this is pretty bad too.

For your reference, I am putting in info around some of the top banks. Gross NPA above 10% tells you that the bank's loan policies are not adhering to RBI guidelines.

Some Good ones

1. HDFC: Gross NPA: 1.36%, Net NPA: 0.39%, ROA: 1.90%

2. ICICI: Gross NPA: 6.7%, Net NPA: 2.06%, ROA: 0.39%

Some Bad Ones:

1. BOI: Gross NPA: 15.84%, Net NPA: 5.61%, ROA: -0.84%

2. Allahabad Bank: Gross NPA: 17.55%, Net NPA: 5.22%, ROA: -3.48%

Some REALLY BAD ones:

1. Indian Overseas Bank: Gross NPA: 21.97%, Net NPA: 10.81%, ROA: -1.35%

2. UCO Bank: Gross NPA: 25%, Net NPA: 9.72%, ROA: -1.84%

You can easily find these numbers from Moneycontrol or ET. In the next few days i.e. by end of March, all banks will disclose their latest numbers.

Keep an eye, whether these ratios are doing better or worse than last Financial year numbers.

Would be sensible to shuffle your hard-earned money accordingly.

Feel free to add in any other inputs you may have.

All the best!