House Panel Asks Banks to Go Slow on Debt Recast to Curb NPAs - The New Indian Express

House Panel Asks Banks to Go Slow on Debt Recast to Curb NPAs

Published: 25th January 2014 06:00 AM

Last Updated: 25th January 2014 01:23 AM

Former finance minister and senior BJP leader Yashwant Sinha, who heads the Parliamentary Standing Committee on Finance, on Friday said state-owned banks should immediately stop repeated restructuring or ever-greening of corporate debt to rein in their ever increasing NPAs.

Terming the situation of non-performing assets (NPAs) as horrendous and need to be addressed immediately, Sinha said that “ever-greening” of loans was adversely affecting the health of public sector banks.

“The spiraling of NPAs is due to bad economic situation, is horrendous and requires urgent attention,” he observed.

The Parliamentary panel suggested that banks must stop ever-greening of loans. “If there is strong case for restructuring then go ahead and do it. But do not go on doing it repeatedly,” a member of the panel observed after the meeting.

NPAs of public sector banks rose by 28.5 per cent from Rs 1.83 lakh crore in March, 2013 to Rs 2.36 lakh crore in September, according to Finance Ministry’s reply to Parliament in the just concluded Winter Session. Total NPAs had increased to Rs 1.37 lakh crore in March, 2012 from Rs 94,121 crore in March 2011.

According to the information provided by the Finance Ministry, top 30 loan defaulters of public sector banks (PSBs) account for more than a third of the total gross NPAs of the state-run lenders.

The members were of the view that NPAs are the result of bad economic situation, but there were also management issue of every-greening of loans which could be avoided by “not renewing loans, particularly of corporate”, the member said.

Sinha said the worsening NPA situation is the direct responsibility of the Reserve Bank which was working to rectify the problem, he said.

He also said that RBI Governor Raghuram Rajan would appear before the Parliamentary panel on February 4.

“The ratio of top 30 NPAs as a percentage of gross NPAs, in respect of public sector banks, as on September 2013 is 35.5 per cent and for all banks it is 38.8 per cent,” Finance Minister P Chidambaram had said in a reply to the Rajya Sabha.

The Gross NPA amount of top 30 accounts of public sector banks (PSBs) stood at Rs 72,174 crore, while for all banks it was Rs 91,667 crore at the end of September.

In case of nationalised banks, top 30 defaulters contributed 43.8 per cent to the GNPA with Rs 55,663 crore.

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