Manage your NPAs, FM tells public sector banks

Manage your NPAs, FM tells public sector banks

NPAs does not mean assets are lost: Financial Services Secretary Mittal

Concerned over rising bad loans, Finance Minister Pranab Mukherjee has asked the banks to take steps to manage their non-performing assets (NPAs) which has grown on account of economic downturn.

“NPAs have grown at an uncomfortable and unacceptable rate in the past couple of years. The RBI has recently advised the selected banks to take necessary steps for appropriate NPA management. I hope the concerned banks will act on the advice of the RBI,” he said.

The banks, he added, “have to tread cautiously in the risks confronting the banking sector, especially the risks arising out of the asset quality, market volatility and the global downturn”. The minister talked about rising bad loans of the banking sector at a function to launch the 4001th branch of Bank of India.

NPA of public sector banks stood at about 3.3 per cent of the assets in 2011-12 as against 2.3 per cent a year ago. Several companies are opting for corporate debt restructuring (CDR) to tide over the difficult financial situation in the backdrop of slowdown.

Nothing to panic

Financial Services Secretary D K Mittal, however, said that while NPAs is a concern, there was “nothing to panic”. “NPAs is not something which means that assets are lost. It only means that these asset is not able to pay me for 90 days,” he said adding recovery by banks in the last quarter of 2011-12 was highest ever. When asked about segments where there were maximum bad loans, Mittal said 7-8 sectors including power and distribution companies (discoms), civil aviation and textiles are under large stress.

He said real estate lending by banking sector has been restricted for quite sometime. “So the real estate sector is managing its resources by not borrowing from the banking sector, but outside the banking sector” he added.

He emphasised that Indian banking system was much more robust than in Europe. “To say that Indian banking sector is at a difficult stage is not fair. It is much sounder than what is there in the European banking system,” he said.

He said NPAs are generated in the banking system and there was no scope for “window dressing”. “NPA management is something we are working together... NPA is across the board and we are trying to manage it”. However, neither Mukherjee nor Mittal named the banks which have been advised by the RBI.

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