Finance Minister Arun Jaitley said he will wait for some more quarters to find a pattern in the dip in bad debts of public sector banks.
“The banks themselves are of the assessment that it may take them two-three quarters to reach a somewhat greater comfort level,” Jaitley told newspersons after reviewing the performance of public sector banks on Friday.
Technically known as non-performing assets (NPAs), loans are declared bad after three successive payment defaults of instalments. Bad debts (as a percentage of advances) have come down to 5.2 per cent at the end of March, from 5.63 per cent on December 31. However, the level of bad debts at the end of last fiscal is still high, compared with 4.72 per cent at the end of 2013-14.
“Banks themselves are going to make efforts to reduce their NPAs. We did ask each of the banks that have a higher NPA level to explain the reasons,” he said, adding that the Government will closely monitor the NPA situation over the next few months.
In four public sector banks — Vijaya Bank, State Bank of Travancore, Canara Bank, Syndicate Bank — the gross NPA level is less than 5 per cent, while in 13 banks, the gross NPA is more than 5 per cent. These include, among others, United Bank of India (9.38 per cent), Indian Overseas Bank (8.3), UCO Bank (8.05), PNB (6.71) and IDBI Bank (6.49).
Matter of concern Later, the Finance Ministry said in a statement that rising NPAs, which are impacting the credit growth of banks, have been a matter of concern for banks and the Government and were discussed in detail in the meeting.
The increase in NPAs is due to some infrastructure projects, slowdown in recovery in the global economy and continuing uncertainty in the global markets leading to lower growth rate of credit. As a result, NPA as percentage of total credit has gone up, it added.
In addition, stringent provisioning norms further reduce both future credit flow and profitability. “Public sector banks continue to be under stress on account of their past lending. It emerged in the meeting that a sector by sector approach is necessary for NPA solutions and while companies needed promoter change, others needed greater equity.
“Systematic steps towards improvement of asset quality were expected from the banks by the Finance Minister,” the statement said.