16 govt banks miss NPA target

In the wake of the deterioration in the overall economic climate, most public sector banks missed the target on gross non-performing assets during the last financial year.

Out of 27 public sector banks, 16 entities, including State Bank India, reported higher level of gross NPAs than the target set for the year-ended March 2009, according to data available with the finance ministry. Along with SBI, the country’s largest lender, its six associate banks were also unable to meet the Statement of Intent (SOI) target for 2008-09.

SBI also had to treat the account of Ratnagiri Gas and Power Pvt Ltd, earlier called Dabhol Power Company, as non-performing assets (NPA) following Reserve Bank of India’s advise to lenders to a project to use the prudential asset classification norm. While all the lenders had agreed to treat the Ratnagiri exposure as NPA, IDBI Bank failed to meet RBI’s stipulation and instead sought a review. Last month, RBI reiterated its stance and has asked IDBI Bank to treat the power project as a non-performing asset. IDBI Bank is not among the 16 banks that missed the NPA target it had set for itself.

 

The gross NPA target is one of the key parameters in the statement of intent which bank chiefs sign with the finance ministry at the start of the year. It is only after the statement of intent targets are met that the bank chiefs can hope to receive their bonus.

Senior State Bank of India executives said that while setting the target for the last financial year, banks did not envisage the impact the global financial turmoil would have on the Indian economy and various segments of business and industry.

Bankers said it was not a surprise that banks missed the target, especially after Indian industry, particularly small and medium enterprises had to face sharp moderation in demand. As a result, their revenues were hit, the SBI executive added.

Many sectors such as auto parts, textiles, and gems and jewellery were significantly hard hit and some units, despite the debt restructuring, remain under stress.

While banks have tried to contain slippage by restructuring loan accounts, it is not possible in each and every case, since the company has not provided adequate data, said the chief of a mid-sized public sector bank.

A senior executive with a small public sector bank said the rising gross NPAs means more pressure on bottom lines. State-owned banks have to make provision out of profits for bad assets. But, the government is alive to concerns and has plans in place to pump additional capital up to Rs 20,000 crore in public sector banks to maintain capital adequacy of 12 per cent.