BackRBI sees improvement in bad loan management of banks: S.S. Mundra
While the banking sector as a whole seems to have performed well on loan recovery, some individual banks diverged, RBI deputy governor S.S. Mundra said
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Mumbai: Fresh accretion of bad loans moderated in the fiscal first quarter, with most banks performing better in loan recovery, Reserve Bank of India deputy governor S.S. Mundra said on Tuesday.
In April-June, the level of bad loans arising out of restructured assets also dropped, Mundra said, referring to an investment advisory report by an unnamed third party.
“The fresh addition may not be happening from the corporate lending side but from MSME (micro small and medium enterprises), which is what the report is saying. We will have to verify this claim. If that is the trend, there will be obviously some concern about it," Mundra said.
While the banking sector as a whole seems to have performed well on loan recovery, some individual banks diverged, Mundra said.
While for some the worst is behind, for others the problem still persists, he said, adding that bad loan management was still a “work in progress".
“Provision will need to continue because of the fresh NPAs which are coming and also due to ageing of old NPAs..," he said. “Most of the cases which are recognised or are being recognized, they carry substantial non-fund exposure also. As we move into the year, there would be crystallization of some of the non-funded exposure," Mundra said at a banking summit organised by the Federation of Indian Chambers of Commerce and Industry (FICCI) and Indian Banks’ Association (IBA).
For 39 listed banking, gross NPAs for the June quarter rose 96.42% year-on-year to 6.3 trillion, from 3.21 trillion a year ago.
Banks will have to do the hard work when it comes to resolution of troubled assets, Mundra said, rather than depending on a third party. Meetings with respect to bad-loan resolution will need to be attended by senior members of banking consortiums to achieve quicker action on accounts, he said.
Mundra also brought up the issue of misselling of third-party products among banks. This was a cause for deep concern for the regulator, he added.
Mundra also cautioned banks against aggressively growing their retail, agriculture and MSME loan books. “We can’t have unlimited farm loans...without farm reform," Mundra said.
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