Difficult to give fresh loans to NPA accounts: SBI

Country's largest lender State Bank of India today expressed concerns about giving fresh loans to accounts which have become non performing assets(NPA) and said the banks do not have any incentive by doing so.

"You can say the regulator has allowed it, that it was required in order to revive (the account), but the question is that it is very difficult to manage. As a result, most banks don't have any incentive once it's treated as an NPA to do anything about it," SBI Chairperson Arundhati Bhattacharya said.

She said the moment an account is declared NPA, giving further money to it, and very often this is required for stressed assets, becomes almost impossible.

Listing reasons, Bhattacharya said, "One, you will be actually bloating up your NPA numbers further by giving it more money. Second, if you look at the PSBs and the kind of questioning they have to go through -- If it is NPA, why did you give it more money? What is the reason you have given money?"

While speaking on bad loans at the same event, RBI Governor Raghuram Rajan said that NPAs are largely an accounting issue.

"But beyond the accounting issue, there is a real issue that for a project under distress, how will you make sure that it's put back on track. Which is why we keep emphasising the fact that if it is an NPA, it does not mean you can't lend to it," Rajan said.

Bhattacharya said stress in the mid-corporates in the recent past has come down.

"In fact, even the larger of the SMEs (small and medium enterprises) are beginning to show less stress," she added.