The withdrawal of high-value cash will also hit the bottom line of banks that have been busy exchanging old notes and issuing valid currency at the cost of credit growth and loan recovery.The banking sector came almost to a standstill for nearly two months after the surprise announcement by Prime Minister Narendra Modi on November 8 scrapping Rs 500 and 1,000 notes.Out of the 27 public sector banks, 14 posted losses, aggregating Rs 34,142 crore, last fiscal and the trend has not shown any improvement in the first half of 2016-17.

Worryingly, even private lenders have witnessed a jump in bad loans, pushing down their net profit.Public banks have seen nearly Rs 80,000 crore increase in gross non-performing assets (NPAs) in the three months ended September 2016.Their gross NPAs rose to Rs 6,30,323 crore as against Rs 5,50,346 crore by June-end.Mindful of an NPA surge in the aftermath of the cash recall, RBI has provided additional 60 days for repayment of housing, car, farm and other loans worth up to Rs 1 crore.

However, bankers feel that NPAs will move up at the end of the fourth quarter when the impact of the notes ban takes hold.As far as wilful defaulters are concerned, PSBs have reported 16% rise at 8,167 that collectively owe them Rs 76,685 crore at the end of March 2016. Dues to the banks went up by 28.5% to Rs 76,685 crore in 2015-16, from the earlier Rs 59,656 crore.On the recapitalisation front, the government has already announced funds infusion of Rs 22,915 crore, out of the Rs 25,000 crore earmarked for 13 PSBs for the current fiscal. Of this, 75% has already been released to them.

Banks have not been able to carry out their lending activity optimally since November 8 as their prime focus turned to exchanging notes and accepting old currency.The result: Bank credit shrank by a whopping Rs 61,000 crore, or 0.8%, during the fortnight to November 25.The outstanding credit stood at Rs 72.92 lakh crore as of November 25, according to Reserve Bank of India data. The year-on-year credit growth was just 6.6 per cent, down from 9.3 per cent.

Bankers say there has


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