Huge provisions made for NPAs (non-performing assets) by banks constrained the credit disbursement, which is essential to support economic growth, pointed out President Pranab Mukherjee here at a function.

Though Indian banking sector stood solidly despite global economic crisis and challenges, a major area of concern for the sector is the huge NPAs, he said at the centenary celebrations of Karur Vysya Bank.

Elaborating on the NPAs, he said the aggregate provisions made by all scheduled commercial banks increased significantly to ₹ 170,630 crore for the year ending March 2016 from ₹ 73,887 crore for the year March 2015. Provisions for NPAs swelled due to increase in stressed assets.

Stressed advances to gross advances of scheduled commercial banks increased from 10.90 per cent in March 2015 to 11.40 per cent in March 2016.

As a result, resources available for credit disbursement by commercial banks have been affected and this is not in a desirable situation. There is need for credit expansion in a growing economy like India. Overall, the Indian banking sector has done well. However, they must remain prudent about the situation of NPAs, he added.

Raghuram Rajan took right measures

President also applauded the role of the former RBI governor Raghuram Rajan for putting appropriate system to move the banking system in the right direction.

Mukherjee, who gave his assent for GST bill to become a law on Thursday, expressed hope that the Central government would set GST Council soon to fix the tax rate.

He asserted that GST would not only be a one uniform rate of taxes but it would also be single point taxation and thereby reducing cascading effect of indirect taxes. “Finally with the constitutional procedures being complied and constitution amendment being carried by both Houses of Parliament and day before yesterday more than 19 states, perhaps 20 states, ratified and, therefore, it has qualified for Presidential assent,” he added.

Mukherjee said that due to basic foundation and on strengths of macro economic indicators Indian economy was doing well and was expected to achieve a GDP growth of 7.5 per cent in 2016 and 2017 as against 7.3 per cent in 2015. Also, current account deficit improved to 1.1 per cent of GDP in 2015-16 from 1.3 per cent in the previous year. Foreign exchange reserves stood strong at $ 365 billion.

Due to normal monsoon, Indian agriculture sector is expected to achieve higher growth this year and the total foodgrains production is expected to reach 2013-14 level of 265 million tonnes.

Recalling his association with KVB, C Vidyasagar Rao, Governor of Maharashtra and Tamil Nadu pointed out that the technological changes in the banking sector were expected to transform the country into a cashless economy. He asserted that banks had vital role in boosting job prospects and supporting start-ups and entrepreneurs.

A book on bank’s history was released by Rao and President received the first copy.

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