The non performing assets (NPA) of the Industrial Development Bank of India (IDBI) has fallen as a percentage of its total asset portfolio but has grown in absolute terms.
The NPA dropped from 10.3 per cent of the asset base to 10.1 per cent , while it rose in absolute terms by Rs 736 crore, from Rs 4365 crore to Rs 5101 crore for March end 1998. S H Khan, chairman and managing director, IDBI, said the financial institution had set up recovery cells both at the head office and branch offices to reduce the level of the NPA.
The institution had also entered into compromises to recover money from borrowers. Khan emphatically stated that all reschedulings were not an attempt to "camouflage" the NPA.
IDBI has shown willingness in rescheduling loans and making fresh accommodation of loans for corporates with a good track record and who, at present, are facing a temporary cash crunch.
"This is a part of the strategy to help the industry recover but at the same time the asset is classified as NPA," he said.
Khan also said that it had given no guarantees to corporates to raise money and turnaround a non performing asset.
According to Khan, out of the Rs 4,000 crore worth of guarantees provided, only Rs 150 crore was not project related. Of the total NPA, sub-standard assets constitute seven per cent while the doubtful assets stand at 3.1 per cent.
The institution has written off Rs 167 crore for the fiscal year 1997-98 as against Rs 100 crore the previous year. Khan said that among the industries that have contributed to large NPA, the steel industry's NPA amounted to 14.12 per cent, the textile industry's NPA was around 11.2 per cent, other chemicals at 9.7 per cent and synthetic fibre sector's NPA stood at 6.9 per cent. Khan also stressed on the need to improve the legal system under which it currently takes nearly 10 to 15 years for case to reach a logical conclusion.
"I am not at all happy with such high NPA, but if the industrial growth improves the NPA will also follow," said Khan. He said that since a large segment of the manufacturing sector has been passing through difficult conditions during the last two years, it has been reflected on the institution's NPA.
Based on Booz and Allen's recommendations, IDBI has set up a loan recovery cell at its head office and a special recovery group at the branch offices.
He said that the FIs had provided certain units, which had a good track record of meeting their commitments in the past but were sluggish due to the general economic slowdown, with need-based relief, including additional assistance to help them overcome liquidity problems. However, no compromise is made on account of accommodation.
