Banks' NPAs may rise due to rate hikes: Central Bank of India

Central Bank of India chief S Sridhar today said the industry's non-performing assets (NPAs) are likely to increase, as some smaller companies that borrowed during the low rates regime would find it difficult to service their loans due to the hike in rates.

"Some increase in NPAs cannot be ruled out in my view, across the industry," the Chairman and Managing Director said, adding that different banks would adopt different strategies to deal with the problem.

The stress will emanate from smaller accounts, which "are not able to bear the increased cost of funding" and are constrained because of a "lower access" to money as compared to the past, he said.

Sridhar pointed out that the stress can be traced back to the years of global slowdown after September, 2008, when the government announced a stimulus that resulted in high liquidity and low rates. (PTI)