Finance Ministry worried about rising bad loans in PSBs
By Vaibhav Aggarwal
Jun 11, 2012
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The rising bad loans has been an issue for the public sector banks (PSBs) for the past two quarters, since major restructuring of assets took place in various industries, mainly distcoms, and airlines.

The Union Finance Ministry has now raised concerns if the credit growth doesn't picks pace, the NPA pressure on PSB can increase further. The public sector banks have seen their gross NPA cross 3% in the past fiscal. FinMin Pranab Mukherjee has called in a meeting of chiefs of PSBs on 12th June to address the same.

The agenda note for the meeting read, "As informed by the Reserve Bank of India, at system level, new accretion to NPAs has been much more than the reduction on existing NPAs due to lower level of upgradation and recoveries. Also, despite write-offs, gross NPAs have continued to rise significantly."

If the assets restructured including those under the Corporate Debt Restructuring (CDR) do not perform as desired, the NPA load might increase further. The SBI and associate banks were the worst hit, where the gross NPA increased from 3.12% to 4.6%, a jump of nearly 1.5%.

The note also states strict measures to be taken to control the NPAs. It includes controlling fresh slippages, and taking legal actions against willful defaulters. The RBI last year also issued similar measures, like sanctions against the promoters of such companies to float new ventures, legal actions, and complaints against the auditors of such borrowers.

The note also added, "It has to be ensured that the recoveries are followed up ruthlessly to ensure at least 20 per cent of the amount is recovered in each quarter starting from the 4th quarter of 2011-12. Similarly, the earlier practice of obtaining post-dated cheques may be replaced with the system of ECS debit authorisation."


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