On analyzing the 23 Government Banks of the country, it is observed, that the solvency ratio (which is the ratio of the banks’ net non performing assets or NPA to that of their Net worth) has now gone upto 63.1 per cent at the end of last quarter which was at 60.9 per cent at the end of the Fourth quarter of FY 2016.  What does this mean?

This means that if the banks make provisions to all their bad loans, they will simultaneously be wiping off their net worth.  The Q2 of FY 2016 showed the figure as 32.9 per cent.  It is further felt that the position is going to worsen further.  The coming quarter should alone come out with the exact extent of bad loans.  There is of course a gap between the Stressed Assets and Gross NPAs.  The stressed assets slipping further would amount to a further hit on the solvency rate.

The Q3 results shows that the Solvency Ratio of three banks viz Indian Overseas Bank, Bank of Maharashtra and United Bank of India was more than 100 per cent which means that the net worth of these banks, would not be sufficient to make provision for their bad loans.

A decline in the NPA of United Bank of India, from Rs. 7,185 crore in Q2 to Rs. 6,729 in Q3 has resulted in a shift in the Solvency ratio to 103.2 which was 111.3 per cent in the previous quarter.  However, IDBI Bank has shown a sharp decline in its position in the recently come out with a Solvency ratio of 81.3 per cent in Q3 which was 64.9 in Q2.  Bank of Maharashtra has shown a solvency poition of 131.8 per cent in Q3 which was 120.87 per cent in Q2.  Slippages are seen even in case of Union Bank of India and Oriental Bank of Commerce.


  1. While SBI has shown a minor slippage in its solvency, its associates viz State Bank of Bikaner & Jaipur and State Bank of Travancore have worsened their position.
  2. Union Bank of India and Oriental Bank of Commerce have also shown a fall.
  3. There is a continuous worry for the capital increase.
  4. The current position of PSU Banks does not permit them to go for public, but only depend on cash crunched Government resources for funding which has allotted Rs. 10,000 towards capital infusion in the recent budget, which is said to be insufficient.

This means that loan assets are now showing a true recognition and the gap between the stressed assets and NPAs is narrowing down.  Due to slow down in the pace of increase in Stressed Assets, PNB is able to show an improved solvency ratio (from 84.6 to 82.5 ) though its position is still bad.  Similar improvements are seen in J& K Bank and Vijaya Bank.

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