 "FM tells PSBs to step up NPA recovery")
Blaming large borrowers for the increasing non-performing assets (NPAs) of public sector banks (PSBs), Finance Minister P Chidambaram on Tuesday asked lenders to monitor 30 big bad debt accounts each.
He expressed concern that recoveries were not taking place at the desired pace and asked these banks to set up a division each to monitor the recoveries from prudentially written-off accounts.
Briefing the media after taking stock of PSBs’ performance, after a meeting with their chiefs, the minister said he disagreed with those painting a dismal picture of the economy. He said banks had cleared 137 of 176 big pending projects, involving investment of at least Rs 250 crore each.
‘RBI measures got $9.6 bn in forex’
India has received over $9 billion from two foreign schemes, which were announced in September to attract foreign funds and help the country bridge the widening current account deficit .
"Banks have taken advantage of RBI's liberalisation of FCNR(B) and tier-I capital schemes. So far, under the two schemes put together, banks have brought in $9.6 billion," Finance Minister P Chidambaram told reporters in New Delhi.
As of June, the gross NPAs of nationalised banks were 3.9 per cent of advances. The State Bank group had gross bad debts at 5.5 per cent.
He asked PSBs to set up separate divisions to recover as much as possible from accounts that were technically or prudentially written off. Every rupee prudentially written off can be recovered.
The recovered amount will directly add to the profitability of banks, since the sum was written off, he said.
"Recoveries are taking place but not as much as I would like...I hope recoveries will improve," he added.
Noting that defaulters often try to stop the process, he said, "Banks have been advised to empower or set apart an officer of senior rank, at least of General Manager rank, to look at recovery, especially recovery from written-off accounts."
Chidambaram said defaulters do a lot of “forum shopping” and try every way to stop recovery.
As a number of agencies paint a poor picture of the economy, predicting it would not even grow by five per cent in 2013-14, Chidambaram gave statistics to buttress his point that its health was not as bad. In 2012-13, GDP expanded at a decadal low growth of five per cent.
He said the Cabinet Committee on Investment and the Project Monitoring Group have cleared projects and companies were going to banks to get loans for these. Banks had received proposals for 176 projects pending prior to March 31, 2013. These projects are of at least Rs 250 crore each and, hence, the investments would total Rs 4.6 lakh crore. Loans of 137 of these projects have been cleared by banks or are in advance stages of clearance, he said.
He cited the examples of projects from Orion Cement (involving Rs 1,718 crore), Tata Steel Odisha (Rs 43,149 crore) and ONGC Petro Additions (Rs 21,396 crore), which have been cleared. Between April 1 and September 30, as many as 173 projects involving investment of Rs 3.24 lakh crore had been processed by banks, he said. "This means things are not as gloomy as it is painted sometimes."
He expressed satisfaction over credit growth by PSBs in the first and second quarters of this financial year and expressed hope that this would remain "satisfactory" in the remaining months.
The minister said housing loans recorded a healthy growth of 42 per cent in the first quarter and 61 per cent in the second quarter, year-on-year.
Meanwhile, the government is fine-tuning how to infuse Rs 14,000 crore of capital into banks as provided for in the Budget. It will consult the Reserve Bank and the Securities and Exchange Board of India and then decide on allocation of additional capital, to enable banks to cut interest rates on two- wheeler and consumer durables’ loans.
He expressed concern that recoveries were not taking place at the desired pace and asked these banks to set up a division each to monitor the recoveries from prudentially written-off accounts.
Briefing the media after taking stock of PSBs’ performance, after a meeting with their chiefs, the minister said he disagreed with those painting a dismal picture of the economy. He said banks had cleared 137 of 176 big pending projects, involving investment of at least Rs 250 crore each.
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The minister said he hoped NPAs were a "function of the economy" and would improve with the recovery in economic growth. "We are monitoring the top 30 NPA accounts in each bank. It is a matter of concern that it is the big borrowers (with loans of over Rs 1 crore) who are defaulting," Chidambaram said.
‘RBI measures got $9.6 bn in forex’
India has received over $9 billion from two foreign schemes, which were announced in September to attract foreign funds and help the country bridge the widening current account deficit .
"Banks have taken advantage of RBI's liberalisation of FCNR(B) and tier-I capital schemes. So far, under the two schemes put together, banks have brought in $9.6 billion," Finance Minister P Chidambaram told reporters in New Delhi.
As of June, the gross NPAs of nationalised banks were 3.9 per cent of advances. The State Bank group had gross bad debts at 5.5 per cent.
He asked PSBs to set up separate divisions to recover as much as possible from accounts that were technically or prudentially written off. Every rupee prudentially written off can be recovered.
The recovered amount will directly add to the profitability of banks, since the sum was written off, he said.
"Recoveries are taking place but not as much as I would like...I hope recoveries will improve," he added.
Noting that defaulters often try to stop the process, he said, "Banks have been advised to empower or set apart an officer of senior rank, at least of General Manager rank, to look at recovery, especially recovery from written-off accounts."
Chidambaram said defaulters do a lot of “forum shopping” and try every way to stop recovery.
As a number of agencies paint a poor picture of the economy, predicting it would not even grow by five per cent in 2013-14, Chidambaram gave statistics to buttress his point that its health was not as bad. In 2012-13, GDP expanded at a decadal low growth of five per cent.
He said the Cabinet Committee on Investment and the Project Monitoring Group have cleared projects and companies were going to banks to get loans for these. Banks had received proposals for 176 projects pending prior to March 31, 2013. These projects are of at least Rs 250 crore each and, hence, the investments would total Rs 4.6 lakh crore. Loans of 137 of these projects have been cleared by banks or are in advance stages of clearance, he said.
He cited the examples of projects from Orion Cement (involving Rs 1,718 crore), Tata Steel Odisha (Rs 43,149 crore) and ONGC Petro Additions (Rs 21,396 crore), which have been cleared. Between April 1 and September 30, as many as 173 projects involving investment of Rs 3.24 lakh crore had been processed by banks, he said. "This means things are not as gloomy as it is painted sometimes."
He expressed satisfaction over credit growth by PSBs in the first and second quarters of this financial year and expressed hope that this would remain "satisfactory" in the remaining months.
The minister said housing loans recorded a healthy growth of 42 per cent in the first quarter and 61 per cent in the second quarter, year-on-year.
Meanwhile, the government is fine-tuning how to infuse Rs 14,000 crore of capital into banks as provided for in the Budget. It will consult the Reserve Bank and the Securities and Exchange Board of India and then decide on allocation of additional capital, to enable banks to cut interest rates on two- wheeler and consumer durables’ loans.