Finance Minister P. Chidambaram on Tuesday termed the rising number of bad loans in the banking sector as “unacceptable”, even as he expressed satisfaction at the growth in bank lending during the April-June quarter of the current fiscal.
“Credit growth in the first quarter ending June has shown 12.08 per cent growth on year-on-year basis,” Chidambaram announced at a press conference, after a review meeting with heads of public sector banks and financial institutions here. Agriculture credit growth is expected to meet the target of Rs 7-lakh crore or even surpass it, while housing loans have jumped by over 61 per cent in the second quarter.
However, the rise in loans has come with higher bad debts or ‘non performing assets’ (NPAs). Chidambaram attributed this mainly to defaults by large borrowers (those who have borrowed Rs 1 crore or more).
“We are monitoring the top 30 NPA accounts in each bank, each zone. It is a matter of concern that it is the big borrowers (with loans of over Rs 1 crore) who are defaulting,” Chidambaram said.
“We have told them (the banks) to keep a very close watch on these large accounts and that they have to recover the amount. I hope recoveries will improve,” he added. As of June, the gross NPAs of nationalised banks was 3.89 per cent, with the State Bank Group alone accounting for 5.5 per cent of total lending. The Finance Minister also advised banks to follow State Bank of India’s action in this regard. He said that like SBI “other PSU banks should set up separate verticals to recover as much as possible from accounts that were written off.”
At the end of June 2013, overall gross NPAs (as a percentage of gross advances) rose to 4.57 per cent from 3.84 per cent in March, 2013. Top 30 NPA accounts as a percentage of gross NPAs were 34.83 per cent at the end of June, 2013.
The Finance Ministry has also finalised the bank-wise capital infusion plan aggregating Rs 14,000 crore. Now, “We will sit down and work out with the RBI and SEBI the manner of infusion of funds and the pricing,” Chidambaram said. While the fund infusion will be through preferential allotment of shares to the Centre, the details of issues, such as pricing, will be worked out in a week’s time, he said.
shishir.s@thehindu.co.in