The Finance Minister, Mr Pranab Mukherjee, has assured the Lok Sabha that the Government was keeping a close watch on the non-performing assets (NPA) situation in the banking system.
Admitting that NPAs had in the last three years been on an “upward trend”, Mr Mukherjee however cautioned against any policy action that would discourage bankers from taking risks and extending credit to the needy.
“I assure you we are always vigilant on NPAs. I have asked chief executives of public sector banks to take a balanced approach.
I have told them not to choke credit. But at the same they should apply due diligence while sanctioning loans,” Mr Mukherjee told Lok Sabha during question hour on Friday.
Noting that the Indian banking system had remained largely unaffected by the global financial crisis of 2008, he pointed out that the story was completely different for large banks in the developed markets.
“The taste of the pudding is in the eating. We all saw how big banks all over the world collapsed like a pack of cards after the global financial crisis of 2008,” he said.
No cause for concern
Mr Namo Narain Meena, Minister of State for Finance, told the Lok Sabha that although NPAs had seen a rising trend over the last three years, there was no cause for concern.
“Public sector banks’ performance has been good compared to private sector banks. NPAs are under control for public sector banks.
In fact, NPAs as a percentage of advances have fallen when you compare it with the situation in 1998, 2000 or 2003-04,” he said.
Mr Meena, however, admitted that NPAs were on the higher side, at over 3 per cent, in respect of two banks – State Bank of India and UCO Bank.