Loan waiver, note ban pushed NPAs: Banks to House panel

Representatives of public sector banks have told a Parliamentary panel that loan waiver schemes, demonetisation, and the GST rollout are the factors driving high NPAs, apart from the non-performance of corporate borrowers.

In a written submission before the Parliamentary Standing Committee of Finance, Punjab National Bank, which was repeatedly questioned regarding recent bank frauds and rising non-performing assets of PSBs, said, “Due to loan waiver schemes, it has become a general tendency of the borrowers not to repay their debt obligations.”

It also noted that currently, the slippages in small accounts are due to several “disruptions in the economy in the recent past, such as demonetisation, GST rollout and unfavourable weather conditions".

MPs in the panel, however, asked the bank representatives as to why they have hesitated to publicly name big corporate defaulters, while no such caution is applied when a farmer defaults on a loan.

Flagging that it is the larger loans which constitute 55.7% of NPAs of scheduled commercial banks, PNB said it is mainly the non-performance of large corporate borrowers which is driving the NPA figure upwards.

In a seven-page written submission, Indian Banks' Association told the panel that while the demonetisation effect has largely been overcome by the small and medium enterprises, the debt overhang has affected the larger corporate, adversely affecting the demand for credit from banks by the industrial segment.

Acknowledging that NPA recovery and stressed asset management as one of the key challenges for the Indian banking system for the last five years, the IBA noted that the recent announcement of recapitalisation of PSU banks by the Centre may be “inadequate” in achieving its desired objective.

The Parliamentary panel headed by Congress leader M Veerappa Moily has called RBI Governor Urjit Patel before it on June 12 on the issue of stressed assets and rising NPAs.