Banks not serious in NPA recovery: Finmin

 Even as Finance Minister Arun Jaitley appears to be shielding public sector banks for their prudent NPA settlement, in private, the ministry has reprimanded the state-owned lenders for not taking quick action on recovery of bad loans as the slippage has increased by 118% to Rs 3.90 lakh crore as on March this year.

“This needs to be seriously stepped up,” Jaitley is believed to have told the lenders in the meeting last week.

“The recovery efforts have not matched the exponential growth of NPAs,” the Finance Ministry has told PSBs. Even within recovery, most of it is coming through write-offs whose percentage is increasing every year, the ministry has revealed, according to sources.

“You must make special efforts to recover these written-off accounts as these are impacting the income of banks,” Jaitley has told the bankers adding that recovery of NPAs has not bettered from last year, while fresh slippage has increased almost 118%.

While the gross NPAs of PSBs have increased from Rs 2.67 lakh crore to Rs 4.76 lakh crore as on March 2016. The recovery efforts of banks have nor resulted in a similar increase from last year.

The total recovery done during 2015-16 by all public sector lenders was Rs 1.28 lakh crore, against total recovery of Rs 1.27 lakh crore done in the previous year.

Even within this recovery, the ratio of written-off assets has increased from 41% to 46%. On operating profits of the banks about which Jaitley had praised the banks publicly last week, the ministry told them in private that their operating profits have been overtaken by their operating expenses.

“The whole balance sheet is affected by earnings, income generation which is dependent on business or credit growth. If income generation does not grow, the banks will be further in pressure as their employee cost and administrative costs continue to increase,” the banks were told.