NPA Provisions saw a rise on Balance Sheets of Indian Banks.

There was little doubt in investors' minds that Indian banks, especially PSUs are into troubled waters. The June 2012 quarter results further confirmed the same. The near term outlook does not look rosy either. Policymakers have cut the GDP (Gross Domestic Product) growth forecasts. Further, an unfortunate mishmash of high inflation, stagnant capex plans and the economic turmoil in the developed economies could worsen credit growth. This has led many Indian companies to either restructure or default on their debt. As a result, the non-performing assets have been piling up on the balance sheets of Indian banks. As per a report on Mint, PSU banks' NPA provisions saw a rise of 129% YoY in the June quarter. Further, the gross NPA ratio went up from 1.5% in June 2011 to 1.8% in June 2012. Even large PSU banks like Bank of Baroda (BOB) and Oriental Bank (OBC) were badly hit. Given that the NPA writeoffs take a direct toll on bank's networth, investors can expect returns to remain muted for the time being.