New Delhi: Concerned over non-performing assets (NPAs) crossing Rs7 trillion, the finance ministry has asked public sector banks (PSBs) to take swift and firm action to deal with the bad loan problem, a banker said.
The issue came up for deliberation during the two-day PSB Manthan ended on Sunday during which the finance ministry expressed urgency to deal with the mounting non-performing assets. One of the focus areas of the meeting was effective monitoring to ensure better recoveries from the stressed assets, a senior public sector banker said.
During the two-day meeting, the banker said it was also discussed as to how a better value can be realised from the resolution process of NPAs. Banks were also advised to look at cases where settlement can be done as part of lowering the burden. Besides, the finance ministry also asked banks to look at a differentiated approach so as to create niche for them, another banker said.
The differentiated approach would also help them strengthen their financials. It is to be noted that NPAs of PSBs have increased to Rs7.33 trillion as of June 2017, from Rs2.78 trillion in March 2015. As a result, the provisioning for expected losses grew substantially.
From 2014-15 to first quarter if 2017-18, Rs3.79 trillion provisioning was made, whereas during the preceding ten years total provisioning was Rs1.96 trillion.
To deal with the rising NPAs, the Reserve Bank of India (RBI) earlier this year asked banks to refer 12 big cases for insolvency proceedings under the Insolvency and Bankruptcy Code (IBC). These accounts together owe debt of about Rs1.75 trillion to various banks. These are accounts with fund and non- fund based outstanding amount greater than Rs5,000 crore, with 60% or more classified as non-performing by banks as of 31 March 2016.