FE:ARUN S : NEW DELHI, AUG 27 2013, 01:33 IST
The rising bad loans of public sector banks (PSBs) and the deterioration in their asset quality have come under the scanner of a parliamentary panel.
The Parliamentary Consultative Committee on Finance will question the government this week on the increase in non-performing assets (NPAs) of PSBs and the measures taken to contain them, sources told FE.
The finance ministry is looking into the books of PSBs to see if there are any cases of “aggressive or reckless lending” in the past or an unexplained jump in the credit growth that has resulted in a rise in NPAs, sources said.
“We had an isolated incident where there was a huge rise in credit growth, but later it was found that those were all financially sound accounts. However, we are monitoring the lending practices of banks now from the NPA point of view,” a senior finance ministry official told FE.
A member of the Parliamentary committee, on condition of anonymity, said the panel considers the rising NPAs a serious problem that needs to be dealt with urgently. This is even as the Central Bureau of Investigation (CBI) is looking into the top 30 major loan defaulter accounts to see if there are any wrongdoings by officials and borrowers.
Sources said the chief vigilance officers of banks could soon be told to prepare a list of cases where there are suspected malpractice in lending, loan sanctioning and disbursement. The idea is to see if anyone has committed any fraud to obtain loans by forging collateral titles, fudging numbers in balance sheets and financials of companies as well as in asset valuation, they said.
The issue of the measures taken by the government to help banks recover NPAs at the earliest was also raised on Friday in Parliament. Finance minister P Chidambaram in a written reply told Lok Sabha the government had asked PSBs to increase the pace of recovery and manage NPAs.
It was suggested to the PSBs that the write-offs of loans should not be more than the recovered amount, the minister said. He had said the PSBs were told to conduct a special drive for recovery of loss assets in addition to appointing nodal officers for recovery.
PSBs were also told to put in place an early warning system and constitute a Board-level committee to monitor the recovery. The minister also pointed to the RBI’s instructions to banks to put in place a loan recovery policy and a robust mechanism for early detection of signs of distress, including prompt restructuring in case of all viable accounts.
He also said recently enacted Enforcement of Security Interest and Recovery of Debt Laws (Amendment) Act, which came into force on January 15, had removed certain bottlenecks in the recovery of bad debts.
Gross NPAs of public sector banks had jumped to R1.79 lakh crore at the end of June quarter from R1.55 lakh crore at March 31, 2013.
“The high level of NPAs cost the banks by way of loss of interest income, besides provisioning, recovery and litigation costs,” RBI had said. The RBI annual report had said the gross NPAs of scheduled commercial banks (SCB) had risen from 2.9% in 2011-12 to 3.4% in 2012-13. In fact, the grosss NPAs of all SCBs rose from R50,000 crore in March 2007 to R1.83 lakh crore in March 2013. The net NPAs have also climbed to R88,300 crore in March 2013.
The banking industry in general has suffered due to the slowdown and delay in government clearances to various projects. SCBs also ended up with a lower profit growth of 12.8% in 2012-13 from 14.6% in the previous fiscal due to the higher provisioning.
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