Finance Minister Pranab Mukehjee on Saturday said the rise in non-performing assets (NPA) of public sector banks in the last financial year was a matter of concern, though profit growth during the period was impressive.
“There is one area though, where I am a little bit concerned. It is the issue of asset quality. During 2010-11, non-performing assets (both gross and net) increased against the level in the previous year,” Mukherjee said while addressing bankers at the annual general meeting of the Indian Banks’ Association (IBA).
“It is important for banks to constantly monitor and bring down NPAs to the previous level,” he added.
State Bank of India (SBI) — the nation’s largest PSU lender, reported significant rise in delinquencies for the previous financial year. Punjab National Bank and Union Bank of India also reported higher gross NPA ratios during the period. The SBI management said bringing down NPA was a priority for the bank and they were working on improving monitoring of asset quality. On other business parameters, the finance minister, however, applauded the bank’s efforts.
| PERFORMANCE METER | ||||
| Gross NPAs as of March 31 | ||||
| 2010 | 2011 | |||
| Bank | Rs crore | In % | Rs crore | In % |
| State Bank of India | 19535 | 3.05 | 25326 | 3.28 |
| Bank of India | 4883 | 2.85 | 4812 | 2.23 |
| Punjab National Bank | 3214 | 1.71 | 4379 | 1.79 |
| Union Bank of India | 2671 | 2.2 | 3623 | 2.37 |
| Bank of Baroda | 2401 | 1.36 | 3153 | 1.36 |
| Canara Bank | 2590 | 1.52 | 3089 | 1.45 |
| Central Bank of India | 2458 | 2.29 | 2395 | 1.82 |
| Compiled by BS Research Bureau Source:- Capitaline | ||||
“I am told that the deposit of banks has grown by 15 per cent and credit growth has been a robust 21 per cent. Most banks have recorded a profit growth of 15-20 per cent, which is impressive,” he said. The finance ministry in a meeting last month reviewed the performance of public sector banks.
SBI RIGHTS ISSUE ON THE CARDS
On the issue of SBI’s capital raising plans by a rights issue, Mukherjee said the finance ministry was looking at the issue. However, he avoided comment on whether the government would subscribe to its share if it happened in 2011-12 (April-March).
“We are going to look into it,” Mukherjee told reporters on the sidelines of the IBA annual general meeting.
The government has pumped in funds in several public sector banks to ensure 8 per cent tier-I capital in the banks. SBI, which reported its earnings last week saw its tier-I capital decline to 7.77 per cent. Though, it is still above the regulatory requirement of 6 per cent.
The government needs to pump in Rs 11,000-12,000 crore to maintain its current stake in the bank at 59 per cent. SBI had planned to raise Rs 20,000 crore through rights issue in the current financial year to boost its capital and expand operations.
GROWTH AND INFLATION
The finance minister said the government and the Reserve Bank of India (RBI) were adopting appropriate policies to achieve higher growth with 'acceptable' levels of inflation.
"Our main challenge in the short term is inflation," Mukherjee said at the meeting. "Inflationary pressure is from both higher global commodity prices and domestic structural demand-supply imbalances in several commodities." The wholesale price index based inflation was pegged at 8.66 per cent in April. It has remained stubbornly high for over a year now, while the food price index, which has shown signs of easing, declined to 7.47 per cent for the week to May 7, its lowest in 18 months.
"By constantly adjusting policies both from the supply and demand side, and taking the appropriate fiscal policies, which are in tandem with RBI (steps), we are trying to achieve higher growth and acceptable level of inflation," Mukherjee said.
The minister, however, said inflationary pressures may not ease soon. "We are told that there will be pressure on commodity prices because of shortage in production of certain essential food items. When there is uncertainty in the global market, particularly on those products for which we have to depend through imports, it would naturally affect (inflation)," he said. The government, he said, was committed to economic reforms, including those in the financial sector, which may help to continue with the growth momentum in the medium- to long-term
