NPAs need firm but pragmatic handling so as not to hit credit: RBI

IANS 04 October 2016

Economy & Nation

The issue of non-performing assets (NPAs), or bad loans, particularly of state-run banks, needs to be dealt with firmly, as well as with pragmatism to ensure that economic activity is not affected by drying up of credit, Reserve Bank of India Governor Urjit Patel said on Tuesday.

"The RBI is giving a lot of attention to the NPAs issue. It needs to be dealt with firmness, as well as with pragmatism to ensure that there is no drying up of credit, that there is no lack of credit in the economy," Patel told reporters here following the announcement of RBI's first bi-monthly monetary policy review by a newly-constituted committee.

"The four pillars of the strategy to deal with NPAs are identification, reporting, recording and resolution. It is the fourth pillar of resolving the NPAs issue that has been lagging behind the other three," he said.

Noting that there were many reasons for the huge accumulation of NPAs, the new governor of the RBI, who assumed charge last month, said that five sectors -- infrastructure, steel, textiles, power and telecom -- accounted for most of banks' NPAs in India.

Indian state-run banks have collectively made an operating profit of nearly Rs 35,000 crore this fiscal, but the massive provisioning for bad debts has pared their net profit down to Rs 222 crore, Finance Minister Arun Jaitley told reporters last month, adding they had finally turned the corner and reported a cumulative net profit.

Many state-run banks had reported huge losses for the first quarter ended June, owing to a sharp rise in provisioning for NPAs (Non Performing Assets) on account of an asset quality review ordered by the Reserve Bank of India.

Jaitley held a quarterly performance review meeting here in September with the Chief Executive Officers and Managing Directors of public sector banks (PSBs) and financial institutions.

The government has recently announced infusion of Rs 22,915 crore capital for 13 PSBs, as part of the first tranche of capital infusion for the current fiscal.

"The broad picture is that PSBs still face the challenge of high NPAs. Detailed discussions have taken place in this regard, while the new RBI norms and changes in legislation like the new Bankruptcy Code and the DRT (Debt Recovery Tribunal) law have helped to empower the banks," Jaitley said.

Gross NPAs of the PSBs have surged from 5.43 per cent of the total advances (Rs 2.67 lakh crore) in 2014-15, to 9.32 per cent (Rs 4.76 lakh crore) in 2015-16.

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Comments

User

Ramesh Poapt

10 years ago

amt of restructred advancres?, amt where rest.adv.went bad?,A4S-5:25
amt of advances? protection to stressed sectors by MIP by depriving indian consumers of low international prevailing cost? cost of not allowing bubble to burst in ailing sectors ? unduly protecting defaulters to undervalue reporting?

GLN Prasad

10 years ago

There are two more questions never answered except total profit by all PSUs this year. What were the total NPAs written off from the last 5 years ? Where the money advanced has gone ? I do admit that some circumstances may be beyond the control of any bank, but not certainly in all cases . How effectively PSUs used the CBI for their recover, identification ? Who were the promoters ? We blame agricultural loan waiver given twice or thrice so far , but do not consider the total NPAs written off and the percentage of agriculture alone in such total amount. What happened to the real estate (land and buildings) and other collateral securities, ? Which segment is not faring well and what are the lessons and directives given by RBI after data analysis. This has to be published in larger public interest.