Banks should recover loans from affluent promoters: Chidambaram

The warning comes in the backdrop of several companies, including liquor baron Vijay Mallya's Kingfisher Airlines, unable to repay bank loan

Finance Minister P Chidambaram today came down heavily on wealthy promoters who are not servicing bank loans in the garb of their company making losses. Expressing concerns that non-performing assets (NPAs) and restructured accounts have risen, he asked banks to take firm actions to recover their dues.

“We cannot have an affluent promoter and a sick company. Promoters have to bring in additional money and companies have the duty to pay back loans. Banks have got the message. Without doing anything that will kill the business of the industry, they will have to take steps to recover their NPAs,” the finance minister said after a review meeting with the heads of public sector banks today.  

Asked whether the banks would ask Kingfisher Airlines promoter Vijay Mallaya to clear dues by bringing in his own money, Chidambaram refused to comment on a specific company. However, some bankers said the grounded airline was mentioned in their closed-door discussions with the finance minister.

A consortium of 17 banks, led by the State Bank of India (SBI), has an outstanding of over Rs 7,000 crore from Kingfisher. The account has turned into an NPA in most of the banks and banks are reportedly considering attaching some of its properties and encashing other securities to recover their dues.

“We are blazing all guns and taking all steps to recovery (of Kingfisher loans)… There is a core group. They are assessing what are securities, what can be disposed of quickly, (and) then they are put on auction,” SBI Chairman Pratip Chaudhuri said after the meeting with the finance minister.

SBI alone has an exposure of about Rs 1,600 crore to Kingfisher—the highest among all lenders, followed by Punjab National Bank and IDBI Bank at Rs 800 crore each. Bank of India and Bank of Baroda have an exposure of Rs 650 crore and Rs 550 crore, respectively.

Finance Services Secretary Rajiv Takru said banks were trying to make a distinction between willful defaulters and people who are genuinely stressed. He said action would be taken in cases where people who can afford to repay their loan, choose not to do so.

As the economy has slowed down and companies are finding it difficult to repay their loans on time, gross NPAs of PSU banks rose from Rs 71,080 crore at the end of March 2011 to Rs 1.55 lakh crore iat the end of December 2012. Corporate accounts constituted over 50% of these NPAs. About 172 corporate accounts have NPAs of more than Rs 100 crore with a total outstanding of Rs 37,194 crore.      

The finance minister said the recovery had improved in the past one or two months and banks would take more steps to deal with the rising NPAs.