Finance Minister Pranab Mukherjee on Monday expressed concern over the rise of non-performing assets (NPAs) of banks at an “unacceptable rate”, triggered by bad debts in the real estate, power, aviation and telecom sectors.
Speaking at a Bank of India function, Mukherjee asked banks to take steps to manage their NPAs. “NPAs have grown at an uncomfortable and unacceptable rate in the past couple of years. RBI (Reserve Bank of India) has recently advised select banks to take necessary steps for appropriate NPA management. I hope the banks concerned will act on the advice of RBI,” he said.
The banks, he added, “have to tread cautiously in the risks confronting the banking sector, especially the risks arising out of the asset quality, market volatility and the global downturn”. Later, Financial Services Secretary D K Mittal told reporters that rising NPAs were a matter of concern, but there was no need to press the panic button. He said gross NPAs of public sector banks stood at 3.3 per cent 2011-2012.
Mittal said real estate, power, aviation, telecom are distressed sectors. “Major NPAs are in these sectors, but it’s not that everyone in these sectors is sick.” He added no window-dressing is happening in state-run banks as these are system-driven NPAs. “So, it's not a big concern but we are not in the comfort zone.” Several companies are opting for corporate debt restructuring to tide over the difficult financial situation in the backdrop of slowdown.