Non-performing assets of public sector banks had risen to 3.84 % of the total advances

In a bid to check non-performing assets (NPAs), Finance Minister P. Chidambaram, on Thursday, exhorted public sector banks (PSBs) to differentiate in their dealings with wilful and genuine defaulters for repayment of their loans.

Addressing members at the third meeting of the Parliamentary Consultative Committee attached to his Ministry on the issue of NPAs in PSBs and measures taken to contain them, Mr. Chidambaram said banks had been told to be strict with wilful defaulters while genuine defaulters facing difficulties owing to the downturn need to be dealt with sympathetically.

“Genuine defaulters and wilful defaulters need to be dealt with separately. We have to be strict with wilful defaulters,” Mr. Chidambaram said while pointing out that a ‘humane approach’ was required for genuine defaulters. “This is time for hand-holding of borrowers who are facing difficulties, especially industry,” he said.

Mr. Chidambaram said the NPAs of banks were critically dependent on the performance of the economy.

Pointing out that the NPAs would be low if the economy had been growing at 8 to 9 per cent, he said the NPAs of PSBs had risen to 3.84 per cent of the total advances as at the end of March this year from 2.32 per cent in March, 2011.

Sectoral details of NPAs

Giving sectoral details of NPAs in industry, the Finance Minister said that while the NPA for agriculture was at 5.46 per cent, it was 5.82 per cent for medium, small and micro enterprises (MSMEs), 3.44 per cent for the corporate sector, 2.37 per cent for retail consumer loans and 1.92 per cent for real estate.

Credit flows

Maintaining that the banks must ensure credit flows to each sector of the industry, Mr. Chidambaram informed members that the banks, in turn, require capitalisation to meet their increased lending which has been growing every year.

For the current fiscal, the government has made provisions of Rs 14,000 crore for bank recapitalisation.

Normally, the banks make their own arrangements to meet capital requirements, both through their own resources and through market borrowings, the Finance Minister said while informing the consultative committee members that all the PSBs are following Basel III norms for capital adequacy.

“Our capital and provisioning requirements are stricter than Basel III norms,” he said.

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