More measures to rein in NPAs on the anvil: Subbarao

PSBs at 3.8% of gross NPAs end-March

Concerned over rising bad loans, the Reserve Bank on Thursday said it will take more measures to check non-performing assets (NPAs) of the public sector banks.

"We are going to put in more measures to see that NPA level is controlled across the asset quality of banks. It is is very very important for credit to continue to go to productive sectors," RBI Governor D Subbarao said while delivering the 5th R Venkataraman Endowment Lecture here.

RBI, in the past, has taken some steps in this regard including increase in provisioning norms and tightening norms for restructuring.

Subbarao noted that public sector banks have high NPAs than private sector banks.
"It is true that NPAs in public sector banks is higher because their decision variables are different, and therefore, NPAs are higher than private sector banks," he said.
"In the Reserve Bank, we are concerned about it. It is a growing concern. Even last Tuesday, when we met at the bank, we spoke about this," he added.

Gross NPAs of the public sector banks (PSBs) were the highest and stood at 3.8 per cent of the system at the end of the March quarter, followed by foreign lenders.
However, the old private sector banks recorded the highest recovery during the period, at 21.2 per cent, followed by PSBs at 9.1 per cent.

Financial Stability Report (FSR) released by RBI blamed seasonality factors for the higher slippages in the March quarter, which traditionally sees higher bad loans.
The report said the loan recast too declined in the March period to 5.7 per cent from 5.9 per cent in the September quarter.

Asked about high cost of agriculture loan in the country, Subbarao said "the answer is that the cost of credit is determined by the riskiness. And banks attach risk to agricultural loan perhaps and therefore, the cost is high."

“As an economy, as public policy makers,” he said,  "we are also concerned about credit offered at reasonable rates to economically productive activities like agriculture, education loans and small and medium enterprises."

"There are several ways of doing it. The government for example, is now giving subvention on agricultural credit," he added.