Public banks' NPAs decline to 3.9 per cent

The country's 27 public sector banks have shown a decline in gross non-performing assets to 3.9 per cent (Rs 42,117 crore) on March 31, 2006.

The figure was 5.7 per cent in 2005 and 8.1 per cent in 2004. The banking system has recorded a gross NPA of 3.5 per cent and a net NPA of 1.3 per cent in the last financial year.

Finance minister P Chidambaram today said the last fiscal was difficult for the banks. "The overall performance shows Indian banking is getting stronger every year," he said.

The average deposit growth rate stood at 12.93 per cent, with 18 out of 27 banks recording a growth of 14-28 per cent. Credit growth in 2005-06 was 37 per cent, the third year of more than 30 per cent growth.

RBI has indicated that non-food credit is expected to increase by around 20 per cent in the current financial year. Credit growth in the first quarter (April-23 June 2006) rose by 1.8 per cent to Rs 26,964 crore, with deposits growing by 2.8 per cent to Rs 57,829 crore.

However, once credit growth accelerates towards the end of the second quarter, banks will have to generate resources to meet credit demand.

Chidambaram, who spoke after meeting the chief executives of the public sector banks, said lending to agriculture doubled in two years at the end of March 2006, with total flow touching Rs 1,67,000 crore against the target of Rs 1,60,000 crore in three years.

"The current year target of Rs 1,75,000 crore will now be revised upwards," he said. On the proposed August 1 strike by employees of public sector banks, Chidambaram said it was "unfortunate and unnecessary".

The strike, called by the All India Bank Employees Association, is against the banks' decision to outsource some non-core functions to private agencies. "I would urge the employees to move with the times," Chidambaram said.