FM asks banks to ensure credit to all sectors

P Chidambaram also appeals to banks to deal strictly with willful defaulters

With non-performing assets (NPAs) of banks rising to alarming levels, Finance Minister P Chidambaram on Thursday asked banks to deal strictly with wilful defaulters. He, however, said genuine defaulters should be protected and credit  extended to every sector.

“Bankers have been told to be sympathetic and have a humane approach towards genuine defaulters. This is the time for hand-holding of borrowers who are facing difficulties, especially industry. We have to be strict with wilful defaulters,” Chidambaram said at a parliamentary consultative committee meeting of his ministry on ‘NPAs in public sector banks’.

At the end of 2012-13, NPAs of public sector lenders stood at 3.84 per cent of the total assets of banks, against 2.32 per cent at the end of 2010-11. In the agriculture sector, NPAs stood at 5.46 per cent, micro, small & medium enterprises (MSMEs) 5.82 per cent, corporate sector 3.44 per cent, retail loans 2.37 per cent and real estate 1.92 per cent.

The finance minister said banks needed capitalisation for enhanced lending. The government has made provisions of Rs 14,000 crore for bank recapitalisation. He added all government-owned banks were following Basel-III norms, adding their capital and provisioning requirements were even stricter than those allowed under Basel-III norms.

Members of the consultative committee suggested various measures pertaining to recovery from wilful and genuine defaulters and on dealing with various cases of NPAs. Some members advocated a softer approach towards genuine defaulters such as farmers and MSMEs, as these segments were vulnerable to factors beyond their control.

“Some members raised the issues of misuse of corporate debt restructuring, downgrading of banks, if any, by rating agencies due to NPAs or other factors, overall analysis of NPAs to ascertain genuine and wilful defaulters and personal guarantees from industrialists, if they have assets, etc, among others,” the finance ministry said.