Finance Ministry directs PSU banks to deal swiftly with burgeoning NPAs

Concerned over NPAs crossing Rs 7 lakh crore, the finance ministry has asked public sector banks (PSBs) to take swift and firm action to deal with the bad loan problem, a banker said.

The issue came up for deliberation during the two-day PSB Manthan ended yesterday during which the finance ministry expressed urgency to deal with the mounting non-performing assets.

One of the focus areas of the meeting was effective monitoring to ensure better recoveries from the stressed assets, a senior public sector banker said.

During the two-day meeting, the banker said it was also discussed as to how a better value can be realised from the resolution process of NPAs.

Banks were also advised to look at cases where settlement can be done as part of lowering the burden.

Besides, the finance ministry also asked banks to look at a differentiated approach so as to create niche for them, another banker said.

The differentiated approach would also help them strengthen their financials.

It is to be noted that NPAs of PSBs have increased to Rs 7.33 lakh crore as of June 2017, from Rs 2.78 lakh crore in March 2015.

As a result, the provisioning for expected losses grew substantially. From 2014-15 to first quarter if 2017-18, Rs 3.79 lakh crore provisioning was made, whereas during the preceding ten years total provisioning was Rs 1.96 lakh crore.

To deal with the rising NPAs, the Reserve Bank of India (RBI) earlier this year asked banks to refer 12 big cases for insolvency proceedings under the the Insolvency and Bankruptcy Code (IBC).

These accounts together owe debt of about Rs 1.75 lakh crore to various banks. These are accounts with fund and non- fund based outstanding amount greater than Rs 5,000 crore, with 60 per cent or more classified as non-performing by banks as of March 31, 2016.