Banks get more time on new NPA norm

After requests by public sector banks, the government has given a six-month extension for classifying non-performing assets (NPAs) using technology. Last year, the finance ministry had asked banks to have a system in place through which NPAs would be identified using technology, without human interference, by March 31. Now, the deadline has been extended by six months to September 30.

According to bankers, the ministry has allowed the banks to complete the task in a phased manner. In the revised scheme, for accounts of over Rs 1 crore, the new method was to be put in place by March 31. For accounts of Rs 50 lakh and Rs 1 crore, the deadline is June 30, and for others, the new deadline is the end of the first half of the current financial year.

Although most banks have adopted the core banking solution (CBS), a few are facing certain problems with the software. As a result, some banks are yet to bring all their operations under CBS.

Punjab & Sind Bank, which recently started the CBS rollout, has been kept out of the purview of the ministry circular. The New Delhi-based bank’s CBS implementation was delayed because of the Satyam fiasco. It initially appointed Satyam to implement CBS, but after the technology provider was charged with financial irregularities, the process had to be started afresh.

The ministry will review the progress made by the banks in the area of classifying NPAs using technology, in a meeting scheduled for the end of the month. Financial services’ secretary S K Sharma will meet the chiefs of government-owned banks in New Delhi for the review.

In the meeting, banks’ financial performance for the year will also be reviewed. In addition, banks will present targets on various parameters such as credit growth, low cost deposit, net interest margin, etc.

The government had introduced targets for financial inclusion from 2010-11 and banks were asked for their financial inclusion plans.

The ministry is also expected to have views from banks on the macroeconomic environment and on interest rates. “With the annual policy of the Reserve Bank of India scheduled a few days after the meeting, it is quite likely the ministry will like the banks’ views on interest rates. Lending rates have already hardened significantly over the last six months, and a further increase will put pressure on credit growth and asset quality,” said a senior executive of a government-owned bank.