Banks' deteriorating NPAs a concern: Pranab

Voicing concerns over "deteriorating assets quality" in the banking sector, Finance Minister Pranab Mukherjee today asked lenders to "tighten the belt" as he outlined the government's intention to bring them at par with global standards.

Banks should "tread cautiously" on risks confronting the sector, the risks arising out of asset quality, market volatility and global downturn, he said at the Special Platinum Jubilee Celebrations of Indian Overseas Bank.

"There is also the concern over the deteriorating assets quality in the banking sector as a whole, where NPAs [non-performing assets] have grown faster than the credit growth over the past couple of years," he added.

The minister said, "There is need to tighten the belt; not only arrest, but reverse the trend of asset quality deterioration in banks with better professional supervision and management."

In order to bring banks at par with global standards, the government is going forward with a "rigorous regime" of capital adequacy under Basel-III which, he said, will be implemented in phases from January 1, 2013, to 2019.

"The stringent norms of Basel III guidelines have also been factored in for maintaining a minimum capital requirement of 8% in all PSBs [public sector banks] which is over and above the regulatory requirement of 6%," he said.

Mukherjee also assured bankers that in the coming years, the government was committed to keeping all PSBs adequately capitalised to bring them at par with global peers and at the same time cater to the needs of majority of people in the country.