The Finance Minister, Mr Pranab Mukherjee, on Saturday cautioned that if GDP growth slows down, there could be some downstream impact on banks' asset quality.

The future challenge in the evolving circumstances is to maintain the growth momentum, said Mr Mukherjee at a banking conclave organised by the Indian Merchants' Chamber.

The challenge to India's growth stems from deteriorating global growth rates, sovereign debt crisis in Europe, the possibility of systemic impact of crisis in international financial markets and some domestic constraints.

In 2011-12, India's GDP growth is estimated at 6.9 per cent, after having grown at 8.4 per cent in the preceding two years. This slowdown in comparison to the preceding two years is primarily due to deceleration in industrial growth.

The Budget has projected India's GDP growth in 2012-13 at 7.35-7.85 per cent .

The worry on the non-performing assets front for banks arises from the deteriorating asset quality in the last few quarters.

Credit rating agency Crisil has assessed banks' gross non-performing assets (GNPAs) to have risen to around 3 per cent as on March-end 2012, against 2.3 per cent as on March-end 2011. The GNPAs could increase to 3.2 per cent by March-end 2013.

Additional capital

The Finance Minister said additional capital will have to be raised by banks. This is to meet the requirements of implementing Basel III norms, the needs of a growing economy and the objectives of financial inclusion.

The Government is committed to ensuring the requisite level of capitalisation of public sector banks in order to maintain a minimum Tier-I CRAR at 8 per cent, said Mr Mukherjee.

>kram@thehindu.co.in

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