FM meets PSB chiefs today; defaults and recast debt on agenda

Steps on recovery of bad or restructured loans and and stalled projects will figure prominently in Finance Minister P Chidambaram's meeting with chiefs of public sector banks (PSBs) tomorrow.

The finance minister will review the performance for the third quarter ended December. The trend in growth of credit and deposits, plus a check on the work done for financial inclusion and direct cash transfers, is to come up for discussion, a top PSB official said.

Bank balance sheets have come under severe pressure due to economic slowdown, delays in project completion and high interest burden on borrowers.

Gross non-performing advances as a proportion of advances of state-owned banks jumped from 2.32 per cent in March 2011 to 4.18 per cent in December 2012.

Restructured loans have grown sharply in the past two financial years. Besides the corporate debt restructuring cell, banks have also recast loans on a bilateral basis.

Senior PSB executives said the government was also concerned at the status of various projects, hit by delays. Increasing delays would result in rising hit on lenders, on account of sectoral exposure and provisioning for bad loans. There are 215 projects of Rs 250 crore and above stalled at present, involving PSBs.

About Rs 7 lakh crore is involved. The banks had disbursed about Rs 53,946 crore to these projects till the end of December.

The sectors involved include power, roads, iron and steel, cement and ports, according to government data.

Also, during the current financial year till December 31, 2012, 126 new projects/proposals had been received by PSBs, involving a total outlay of Rs 3.6 lakh crore. They cover infrastructure sectors and are at various stages of appraisal and sanction, said a senior bank executive.

The recent charges of money laundering on some major private banks might trigger discussions on compliance with the rules in this regard, said a senior finance ministry official.

On Thursday, Cobrapost, an online magazine, claimed its undercover investigation revealed ICICI Bank, HDFC Bank and Axis Bank offered money laundering as a product to their customers.