For every Rs 100 parked in shares of public sector banks, investors carry the burden of Rs 150 as bad loans, which have cumulatively ballooned to Rs 4 lakh crore or 1.5 times the market value of these lenders.
In comparison, bad loans of private sector banks are just about 6.6 per cent of their total valuation.
In case of PSU banks, if loans that face the risk of being declared NPAs (Non Performing Assets) going ahead are also taken into account, their overall stressed advances are estimated to be almost double at over Rs 8 lakh crore.
The problem appears less acute at private sector banks as their gross NPAs are only about one-eighth at about Rs 46,000 crore, which is also well below their total market value.
The Reserve Bank has set March 2017 as deadline for banks to clean up their balance sheets, forcing them to promptly disclose NPAs, take remedial measures and also make adequate provisions in their financial statements. The banks have began complying with effect from their latest set of financial results, which are for the quarter ended December 31, 2015.
The gross NPAs of banking sector are estimated at over 5 per cent of total loans, while overall stressed assets (including declared and potential bad loans) are at about 11 per cent.
An analysis of their latest quarter results shows that the cumulative gross NPAs of 24 listed public sector banks, including market leader SBI and its associates, stood at Rs 3,93,035 crore as on December 31, 2015.
This is nearly 1.5-times of their total market value, which currently stands at Rs 2,62,955 crore.
This also marks a rise of over 50 per cent from their gross NPAs totalling Rs 2,61,918 crore a year ago.
As per RBI, an asset becomes non-performing when it ceases to generate income for the bank. The banks need to declare a loan as NPA which remains overdue for more than 90 days.
Except for State Bank of India (SBI), and a few smaller ones, all listed public sector banks have gross NPAs in excess of their market capitalisation. In most cases, the quantum of bad loans is more than double the market value, while some lenders have gross NPAs as high as four or five-times of their respective market valuations.
In comparison, most private sector banks have gross NPAs well below their market values, although the quantum of bad loans have risen for them as well in a big way.
The gross NPA of 16 listed private sector lenders stood at Rs 46,271 crore as on December 30, 2015. This compares with their total market value of over Rs 7 lakh crore.
Taken together, the cumulative gross NPAs of all listed banks - public and private - has risen to Rs 4.4 lakh crore, while their total market value stands at Rs 9.6 lakh crore.
The banks have taken a big beating on their valuations in recent weeks on investor concerns over bad loans.
The country's most-valued private sector lender HDFC Bank alone commands a market value of about Rs 2.5 lakh crore, which is not far below the total market value of all listed state-run banks. Besides, SBI alone accounts for almost half of the total valuation of all public sector banks.
In terms of gross NPAs also, SBI comes on top (Rs 72,791 crore) and is followed by Bank of Baroda (Rs 38,934 crore).
Others with high NPAs include Bank of India, PNB, Indian Overseas Bank, IDBI Bank, Canara Bank, Union Bank, Central Bank, Uco Bank and Corporation Bank.
Among private sector lenders, ICICI Bank comes on top with Rs 21,149 crore of gross NPAs, while others with high levels of such bad loans were Axis Bank, HDFC Bank, Federal Bank, Karnataka Bank and IDFC Bank.
Raising concerns about the ballooning bad loans, eminent banker and HDFC Ltd Chairman Deepak Parekh said last week that the health of banking sector is one of the key issues impacting the Indian economy.
As at September 30, gross NPAs of banks stood at 5.1 per cent while stressed advances stood at around 11 per cent. The stressed advances of PSUs stood even higher at about 14 per cent, as per RBI.
The quarter ended December 31, 2015 has been even more brutal for banks, with at least ten lenders posting gross NPAs in excess of 8 per cent and 22 others of more than 5 per cent.
"The RBI has clearly articulated that band aid solutions no longer work and that deep surgery is needed. I agree. The RBI went on further to state that the recognition of NPAs was the anesthetic needed for the surgery.
"While I absolutely do not wish to second guess the regulators and I do not at all doubt their competence in assessment of the situation, I only wish to caution that too much of anesthesia can also result in a patient becoming comatose!" Parekh cautioned.
"The banking sector cannot afford another quarter like the one just gone by, but banks have already warned that the next quarter may also look dismal. In just 40 days, listed banks have lost more than Rs 1.80 lakh crore in their market cap," he added.