SBI chief, Pratip Chaudhuri, blames government for rising NPAs

Sangita Mehta, ET Bureau | 2 Aug, 2013, 04.31AM IST

MUMBAI: Pratip Chaudhuri, chairman of the country's largest lender State Bank of India, blamed the government's tardiness in clearing projects and supply of coal - or the lack of it - as the reasons behind rising sticky loans in the banking sector. 

Speaking at a closed-door meeting between bank chiefs and senior Reserve Bank of India officials, Chaudhuri stoutly defended the banks, arguing they alone cannot be blamed for the spike in bad loans, which have hurt their balance sheets. 

The SBIchief was responding to an observation made by RBI officials that sharp rise in non-performing assets is due to improper appraisal and monitoring by banks. Chaudhuri, however, could not be reached for his comments. 

"Is it the banks' failure in monitoring or is it the government that has not delivered what it promised," he had asked, according to bankers present at the meeting. 

Chaudhuri stressed in the meeting that if the government and RBI continue to blame banks for rising NPAs, they would be forced to insert impossible conditions in loan covenants that would make it difficult for borrowers to avail the credit facility. 

Bankers also said that many projects have become unviable because of the delay in getting environment clearances, allocation of land and non availability of coal. Besides, project costs have increased due to time overruns. 

Coal India has failed to scale up its output and meet the requirements of power firms. Power utilities suffered due to unavailability of coal which has impacted their revenue and eventually their ability to repay banks. 

Bankers also gave instances of loan sanctioned for road projects, where 80% of the land was acquired on the assumption that government will allocate the rest, but subsequent delay in government actions had affected such projects. Due to these delays, several manufacturing and infrastructure projects failed to achieve their commercial operation date (CoD). 

As per RBI norms, banks have to classify a project as a bad loan if it fails to start commercial operations from one year of the original date of commencement. 

Banks have to classify the loan as sub-standard even if the company continues to pay regular instalment of loans. 

The net non performing assets ( NPA) of banks have risen 51% in fiscal year 2012-13 to Rs 92,825 crore over the previous year, and a number of PSU banks have shown either a dip in profit or a modest rise in first quarter profit due to sharp rise in stress loans.