Focus on asset quality, Pranab tells banks

Exhorts them to support 9% growth

Focus on asset quality, Pranab tells banks

Finance Minister Pranab Mukherjee receives a copy of 'Bankers Beacon' by Union Bank of India CMD M V Nair (right) at the 92nd foundation day function of the bank in New Delhi on Thursday. PTI

“Indian economy posting growth rate of 9 per cent or more in the coming years is placed at a critical juncture. The banking sector needs to support this growth momentum in the economy while giving due attention to the asset quality and prudent provisioning to balance emerging returns and risks,” Mukherjee said at a function marking 92nd Foundation Day of Union Bank of India.

Mukherjee said, though the Indian banks had emerged from the global financial crisis “successfully with relatively good health, yet challenges do remain.”

However, he noted with concern that there was a decline in the profitability in the Indian banks in 2009-10.

The asset quality of banks deteriorated and the coverage ratio of provisions showed a fall at the aggregate level reflecting a weakening cushion to meet Non Performing Asset (NPA) losses. “Therefore, the banks need to give due attention to the asset quality management and prudent provisioning,” Mukherjee said. 

Financial services

Referring to role of banks in extending wide range of financial services to the people at large, he asked all the banks to step up their efforts towards bringing the vast population into the ambit of formal finance and also boost future economic growth coupled with equity.

According to the RBI, Mukherjee added, of the 6 lakh habitations in India only about 30,000 have commercial bank branches. On an average there are less than 3 bank branches per 100 sq km of land area and this ratio is worse for rural areas and for the North-eastern region.

In 2009, deposit mobilised in rural bank branches was merely 9 per cent of total deposit mobilised by banks and the share of rural credit in total credit of banks was even lower at 7 per cent, he said. The percentage of people having any kind of life insurance cover is just 10 per cent while the percentage of non-life insurance is merely 0.6 per cent, he added.

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