Directing banks to focus on top defaulters, finance minister P Chidambaram said it is the 30 top non-performing accounts which account for bulk of the non-performing assets
Concerned over rising bad loans, finance minister P Chidambaram today directed banks to focus on top defaulters and take action against them.
“You focus on the top defaulters, as well as keep on eye on the top performing accounts... They are keeping a close watch on the top 30 non-performing accounts in each bank and action will be taken on the defaulters,” Chidambaram said.
He was talking to reporters after meeting the heads of public sector banks and financial institutions.
Chidambaram said it is the 30 top non-performing accounts which account for bulk of the NPAs (non-performing assets).
Non-performing assets of banks have been on the rise for past several months due to slowdown in the economy.
The gross NPAs of some public sector banks, including State Bank of India and Punjab National Bank have crossed 4% of the total assets at the end of March 2013.
Gross NPAs of PSU banks have risen from Rs71,080 crore as on March 2011, to Rs1.55 lakh crore as on December 2012.
Chidambaram further said he has asked banks to review their lending rates.
“Reduction in base rate will be powerful stimulus to boost credit growth,” he said, adding that unless the base rate is cut, interest rates cannot be brought down.
While the Reserve Bank of India (RBI) has reduced the policy rates by 1.25% since January 2012, to prop up growth, banks have lowered the lending rates by only 0.30% during the period.
Chidambaram further said the banks would open over 8,000 new branches this year and hire over 50,000 people.
At the meeting with the bank chiefs, Chidambaram reviewed the credit to agriculture, MSME sector, housing, education, minority communities and also financial inclusion.
Chidambaram said while the deposit growth has been modest for the fiscal ending March 2013, credit growth has been slow.
At the end of 31 March 2013, public sector banks’ deposits grew by 14.91%, slightly higher than the growth rate of 14.4% recorded in previous year.
Credit growth at the end of 31 March 2013, was 15.62% which is a decline from the previous year’s 17.76%.
“There is good credit demand from a few sectors—agriculture, small and medium enterprises and retail loans,” he said.
In housing, there are signs of growth especially in commercial real estate for residential purposes. On the infrastructure side, there are some signs of higher credit demand in the road sector, non-conventional energy sector, he added.
“Overall there seems to be some pick up in credit demand, the picture will be clear at the end of second quarter,” he said.
When asked about discussion on gold loan with bank chiefs in the meeting, Chidambaram quipped, “You want gold loan, chances are there you won’t get it”.
Replying to a query on new bank licences for which 26 entities have applied before the RBI, the finance minister said “every guideline has to be satisfied”. He, however, said it is the RBI which will give the licences and the government will have no say in it.
Earlier, he said all banks are compliant with capital norms as per the Basel III requirements. He further said except for four public sector banks—IDBI Bank, Indian Overseas Bank, Bank of Maharashtra and Dena Bank—all other have Capital Adequacy Ratio (CAR) of 8% and more.
These four banks have CAR of more than 7%.