FM says NPAs unacceptable, asks banks to chase debtors
Oct 22 2013 , New Delhi
State Bank of India (SBI) has already set up a vertical and other PSU banks have now been asked to follow suit with officers of at least general manager’s rank heading these verticals.
These verticals should try to recover as much money as they can from written-off accounts as well, Chidambaram told journalists after his three-hour meeting with PSU bank chiefs.
The increase in bad loans was “unacceptable, though not alarming,” he said. “We are keeping a close watch on large defaulters…, monitoring the top 30 NPA accounts in each bank, each zone. It is a matter of concern that it is the big borrowers (with loans of over Rs 1 crore) who are defaulting,” he said.
The finance minister said that though bad loans had increased, the situation was not as bad as it was in 2000 when they were 14 per cent. Since then, NPAs have come down to 2.09 per cent in 2008-09 and remained flat in the next two years.
But NPAs have since started creeping up. As of June, gross NPAs of PSU banks were 3.89 per cent; in SBI it was 5.50 per cent.
Chidambaram was satisfied with the credit growth of PSU banks, which was 12.08 per cent in the first quarter. It is expected to remain satisfactory during the rest of the year. Housing loan growth, in particular, has been big at 42 per cent in the first quarter and 61 per cent in the second quarter. “This is a very healthy rate,” he said.
A slowing economy has affected demand for credit and led to a rise in bad loans of PSU banks. Their net NPAs to net advances ratio slipped to 1.8 per cent at March end from 1.5 per cent a year earlier.
The minister said recovery of bad loans was taking place but it should be faster. He directed banks to recover written-off loans. Writing off loans did not mean that these would not be recovered.
For every rupee technically written off, there must be a rupee recovered. Otherwise banks would not be allowed to write off, he said.
There were some willful defaulters but the bulk of the people did not willfully default. “They default because of circumstances. Once the economy and cash flow pick up, they will pay.”
On capital infusion in PSU banks, he said rough allocations to individual PSU banks had been made from the Rs 14000 crore proposed in the budget. Some banks asked for a little more and “we will work out something.” The manner in which funds were to be infused would be worked out in a week or so.
On additional capital infusion in PSU banks to enable them to provide concessional loans during the festival season till December end, he said banks had indicated that they would be able to provide these soft loans without any additional capital. If some banks still required additional capital for this purpose, the government will be willing to provide, he said.
Regarding stalled projects, he said credit offtake for these was not as gloomy as it was projected to be. Prior to March 31, as many 176 new proposals with Rs 250 crore or more investments each and totalling Rs 4,64,000 crore were approved. Of these, banks had cleared loans or were in an advance stage of clearance of loans in the case of 137 projects.
During April-September, 173 new proposals with total investments of Rs 3,24,000 crore had been cleared. Loans to these projects too had been cleared or were in an advance stage of clearance.
Among projects where loans have been cleared by banks are the Rs 1,718 crore Orient Cements project, Rs 43,000 crore Tata Steel projects in Odisha, the Rs 4,200 crore Krishnapatnam port project and a Rs 26,000 crore ONGC project.
Chidambaram also said India had received $9.6 billion from the two schemes announced by RBI to finance the current account deficit. “Banks have taken advantage of RBI’s liberalisation of FCNRB and tier I capital schemes. So far, banks have brought in $9.6 billion under the two schemes,” he said.
RBI governor Raghuram Rajan had announced in early September the opening of a swap window facility to encourage banks to draw in NRI funds. In this facility banks are permitted to swap fresh FCNR(B) dollar funds, mobilised for a minimum tenure of three years at a fixed rate of 3.5 per cent per annum. Also, he allowed banks to raise capital abroad amounting to 100 per cent of their tier I (equity) capital. The schemes will remain open till November 30.
Chidambaram ruled out the possibility of lifting a ban on the import of gold coins and medallions and asked banks to strictly follow the guidelines restricting inward shipments of the yellow metal.
“Import of gold coins and gold medallions is prohibited,” he said, referring to a suggestion that the government should allow import of coins for ‘shagun’ (auspicious gift) purposes. He said traders could buy gold from the domestic market and make coins, but the government would not relax the curb.
“I have asked banks to be very strict. Banks have to scrupulously follow RBI and government guidelines,” he said.