Banks seek extension of deadline to adopt system to identify NPAs

Public sector banks have requested the government to extend the deadline for moving towards the system of technology-based identification of non-performing assets. Banks have asked that the deadline, which was scheduled to expire on September 30, be extended for another six months.

Some banks that have a large number of small accounts are keen to have the deadline extended. Once the core banking solution is implemented, the system throws up non-performing assets (NPAs) without manual intervention. Some banks which are yet to fully implement the core banking solution have also sought more time to shift to the new system of NPA identification.

“The government had asked banks to shift to the system by the end of this quarter, but some banks have asked for an extension till March 2012,” said senior official of a public sector bank. This is the second time banks have asked that the deadline be extended. According to the initial plan, banks were supposed to shift to the new system by March this year.

The final leg of the transition process includes all loans up to Rs 50 lakh, while loans between Rs 50 lakh and Rs 1 crore were to be shifted by June. Loans worth more than Rs 1 crore were to be shifted by March.

“Data collection in the last leg is tedious because there are many small-value loan accounts, and this is taking more time,” said the chairman and managing director of a large public sector bank. “Most banks have covered all accounts, except for small loans from agriculture and educational loans. We are on the job, too. Also, data collection is being carried out for old loans,” he said.

Most public sector banks also showed a decline in their profits due to higher provisioning on account of system-recognised NPAs. “This system is helpful in the long run, though we took a hit in the initial quarters. Once identified, we have three months to follow up on the account and convert it into a standard asset,” said the official.