IDBI chairman P P Vora said only joint discussions among all related parties could tackle the problems of growing non-performing assets (NPAs) in the country's banking sector.
Addressing members of the Indian Chamber of Commerce here today, he said that of the total of Rs 140,000 crore asset base of the three financial institutions, NPAs should not me more than five per cent on an incremental basis. The bad loan level at present is more than 10 per cent.
"If NPA is to be contained at less than 5 per cent, the we can have a sound industrial regime, that however will require better technology, economic size and better branding," he said.
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The chairman commented that commercial banks were not focused since they lacked skills of appraisal, asset monitoring and implementation of new projects. Vora stressed on a set of new rules that should be brought in to bring down NPA levels.
Citing an example from the housing sector, he said that NPA in the sector is less than 2 per cent against a total asset base of Rs 45,000 crore. The reason being that the ground rules for the sector are well laid down. "This however does not mean that the rules for the industry are in no way inadequate," he clarified. "But a better understanding of projects and their viability are required," he explained.
Vora also warned that if action is not taken things may go out of hand, and hence the institutions and entrepreneurs have to work together to arrive at a solution.
Talking on projects in eastern India, he said that these needs to be relooked at and mind sets needs to be changed. "In a number of cases we have found that there is a gap in equity, but promoters are not ready to share the management stake with a third party", he said.