Banks battling big spurt in bad loans: Arun Jaitley

In view of the major increase in their non-performing assets (NPA), banks are taking a number of steps against wilful defaulters to recover loans, Finance Minister Arun Jaitley said Friday.

"It is normal for the banks to have 2-3 percent of NPA. But in the last 2-3 years, the NPA has increased substantially and gone up to 6 percent. Stress assets have also been increased," Jaitley told the Lok Sabha during the question hour.

Actions have been initiated against those who have failed to repay the loan amount under various provisions of the Indian Penal Code and and civil laws, he added.

The prolonged and steep economic downturn, accompanied by high interest rates, has led to a sharp deterioration in asset quality for the banking sector and increased the pressure of NPAs.

The percentage of gross non-performing assets (GNPAs) for the banking sector is expected to worsen from 3.9 percent of advances in fiscal 2013-14 to about 4-4.2 percent in 2014-15, Moody's analyst ICRA has said in a report.

Bad and restructured loans crossed 10 percent of all loans in mid-fiscal 2013-14 and are expected to touch the 15 percent mark by the end of the financial year 2014-15.

During the April-December period last year, the banks had recovered Rs.18,933 crore, which is only about 20 percent of the total non-performing assets of about Rs.192,000 crore in the banking system.