In another crackdown on banks, Finance Minister P Chidambaram said the rise in bad loans was because banks have been soft on their recovery mechanism.
“Bankers have been tardy and soft on recoveries… We have failing companies and prosperous promoters. We have to recover these loans,” Chidambaram said at the 20th anniversary of National Stock Exchange.
Though, he agreed that now banks have set up separate recovery departments for the same.
Arundhati Bhattacharya, Chairman, State Bank of India said, “Nothing can be so fast, all comes with a lag. All of us (banks) have been much more aggressive (on recovering the non-performing loans).”
Further, the FM raised concerns that corporates avoid the bond market and go to the banks as banks do not refuse.
According to Chidambaram, “It is very convenient for corporates to go to a bank for working capital loans. Banks and corporates have entered into a cosy relationship. Only when a bank says no to a corporate, the corporate will be forced to go to a bond market.”
Bhattacharya defended this saying, “Already, the better rated corporates don’t come to the banks for working capital they go to the CP market. Those who cannot access bond markets come to us. So there are no takers for the lesser rated by the credit rating agencies and hence, they come to the banks.”
The Finance Minister also pointed out that the NPA numbers around 2004 were suppressed as they were identified manually. In the last few years, the system generated NPL figures give the “truer picture” and hence both the numbers cannot be compared.
Policy rate
On monetary policy, Bhattacharya said, “Majority of the industry is expecting some kind of a hike… It is a tough task. If you see the CPI, it was largely driven by food prices was the main component and food prices are coming down. So that being the case, the next numbers will be better. The WPI numbers will come out on Monday and hence we should wait.”
The RBI is due to announce its mid-quarter monetary policy 2013-14 on December 18. Amid rising inflation and slow GDP growth, market players are expecting a 25 basis point hike in repo rate.