Focus on top 30 defaulters: Chidambaram

Says action will be taken against defaulters, especially when there is a case of wilful default

Finance Minister P Chidambaram on Wednesday asked banks to focus on top 30 non-performing accounts and take action against defaulters. “I asked banks to focus on the top 30 performing accounts as well as the top 30 non-performers accounts, and the banks’ balance sheets will improve sharply,” the finance minister told a press conference, after a meeting with heads of public sector banks and financial institutions. A bulk of the non-performing assets (NPAs) are from the top 30 non-performing accounts, he said, and action would be taken to recover from these, especially when there was a case of wilful default.

The finance minister also discussed with banks growth in bank credit and deposits.

As the economy was facing a slowdown, gross NPAs of public sector banks stood at 3.78 per cent of advances at the end of March 2013, against 2.32 per cent at the end of March 2011. Gross NPAs of the country’s largest lender, State Bank of India, was at 5.17 per cent at March-end 2013.

At the meeting, the finance minister also discussed with banks growth in bank credit and deposits. While deposit growth has been modest in 2012-13, credit growth has been slow. Last year, public sector banks’ deposits grew 14.91 per cent, against 14.4 per cent in the previous year. Credit growth declined to 15.62 from 17.76 per cent a year ago.     

“There is good credit demand from a few sectors — agriculture, small and medium enterprises and retail loans. In the recent weeks, there is a pickup in credit demand. On the infrastructure side, there are some signs of higher credit demand in the road sector, the non-conventional energy sector. The pickup will be clear at the end of the second quarter,” said Chidambaram.

Credit flow to agriculture, housing, education, medium & small enterprises, and minorities was reviewed. The progress on financial inclusion by banks and expansion of branches and automatic teller machines (ATMs) was also discussed. Public sector banks would open 8,000 branches this year and hire over 50,000, it was decided.

The finance minister said all public sector banks were well capitalised according to the Basel-III requirements.

Except for IDBI Bank, Indian Overseas Bank, Bank of Maharashtra and Dena Bank, he said, all others have a capital adequacy ratio (CAR) of eight per cent and more.

These four banks have CAR of more than seven per cent.

These banks would be provided capital support from the government so that CAR goes above eight per cent by the end of this financial year, it was decided.

Chidambaram also asked banks to help restart stalled projects. On a query on new bank licences, he said every guideline has to be satisfied. He, however, added it was the Reserve Bank of India which will give the licences and the government will have no say in it.