Public sector banks have been asked by the finance ministry to switch to a technology based system for calculating non performing assets (NPAs) of the bank.
The major motive behind this idea is to reduce human intervention as much as possible in the process. Banks have been asked to implement the process by March 2011.
“Since most banks are on the core banking solution (CBS) platform, the government is of the view that classifying NPAs using CBS should not be a problem for banks,” said the chairman and managing director of a PSB.
The largest lender of the country, State Bank of India and other big names like Union Bank of India have reported to the government that they calculate their NPA level using CBS platform.
CBS has been achieved by most of the public sector banks barring the likes of Central Bank of India and Punjab and Sind Bank.
“The government has noted that some chairmen of state-run banks understate NPAs when they approach retirement. The bad loans come to light once the new chairman takes over,” said the chairman of a government bank.
RBI has recommended 100% provisioning of NPAs.
The NPA level of banks has shown a rise in the first quarter of this fiscal. Listed banks saw gross NPAs rise by Rs5,100 crore, with SBI alone seeing a fresh addition of Rs 1,300 crore.