MUMBAI: Prime Minister Narendra Modi is keeping bankers on their toes. Following up on his ambitious Jan Dhan Yojana push to ensure crores of unbanked get bank accounts, the Prime Minister has called a meeting with bank chairmen to discuss issues ranging from non-performing assets, loans to small and medium enterprises, among others. The meeting is likely to happen next week.
Top bank officials have been asked to make presentations with regard to efforts that bankers have made towards recoveries and be prepared with specific details of top 30 NPAs of state-run banks and gross NPAs of `1 crore and more, as also loans that have been restructured, according to banking sources.
Gross NPAs of the banking sector stood at over 4 per cent of their total outstanding loans as of March 2014. The Reserve Bank of India has over the past year or so taken several measures to improve recoveries, rationalise restructuring of loans and shut out wilful defaulters from future bank credit as also making board members on their companies accountable.
Also likely to be a part of the discussion is implication of an interest rate cut by banks, with inflation based on both Wholesale Price Index (WPI) and Consumer Price Index (CPI) falling to reasonable levels. Industry and other trade bodies have been making representations to the government to nudge the central bank to cut lending rates.
The RBI’s next monetary policy review meeting is scheduled on December 2.
Also weighing on banks is the slow pace of growth of loans to the corporate sector, which has declined to a decade-low of single digit. This drop in demand is a matter of concern to bankers as some leading companies are able to borrow from other market instruments at rates much lower than a bank base rate. Status of loans to new projects and revival of investment demand will also be discussed at the meeting.
Other issues that are scheduled for the meeting include loans to the agricultural sector, housing, education; credit to minorities and loans and financial inclusion.
Modi will be chairing the meeting, which in the past was headed by the finance minister.