Check NPAs but don't choke credit, FM tells banks

Check NPAs but don't choke credit, FM tells banks

“NPAs in public sector banks have witnessed an upward trend. I had a meeting with chiefs of these banks and drew their attention. I asked them to take care of it. I told them not to choke credit but apply due diligence while sanctioning loans,” he told the Lok Sabha during Question Hour.

The gross NPAs of the public sector banks have risen to Rs 78,119 crore as on June this year compared to Rs 44,039 crore in March 2009.

Mukherjee also asked the banks to follow a balanced approach and said there should not be any undue delay in sanctioning of loans.

He assured the House that the Indian banking system was strong. “We have seen how the big banks in the world have collapsed (2008) like a pack of cards, but Indian banks survived.”

This doesn’t mean that NPAs should be allowed to rise. “We are always vigilant. But we should not do anything wherein banks start refusing loans to the needy,” he said.
Expressing concern, Members said the NPAs were rising due to various factors like lack of proper due diligence while giving loans to firms and also rising interest rates.

Meanwhile, terming the current high inflation as unacceptable, Reserve Bank Deputy Governor K C Chakrabarty said the possibility of another round of interest rate hike is always there. “It (inflation) is not acceptable to anybody,” he said.

Asked if the RBI could go for another round of hike in its mid-quarter credit review scheduled for September 16, Chakrabarty said “expectation part is always there... probability is always there”.

The central bank has adopted a tight monetary policy in the last 16 months in its bid to tame inflation, which had reached 9.44 per cent in June this year. It has hiked key policy rates 11 times since March 2010.

The tight monetary policy regime has started impacting industrial growth, which slumped to 5.8 per cent in May, as against 8.5 per cent in the same month last fiscal.

While the government says it is taking steps to bring down inflation to a comfortable zone, experts said the volatility in the global commodity market and a sub-normal monsoon could put further pressure on prices.

DH Newsletter Privacy Policy Get top news in your inbox daily
GET IT
Comments (+)