‘Banking system facing temporary challenges’

Infra lending caused bad loans: Canara Bank chairman

June 25, 2018 09:58 pm | Updated 10:51 pm IST - Chennai

The Indian banking system, which is facing temporary challenges in terms of non-performing assets (NPAs), is confident of regaining it’s glory, according to T.N. Manoharan, chairman, Canara Bank.

“Contrary to the public perception that the bad loans are due to wilful defaulters and indiscriminate lending, it is only a small segment,” said Mr. Manoharan.

“The real issue is commercial banks lending to big infrastructure projects, which got into problems,” he said, speaking at an event.

Mr. Manoharan and Shyam Srinivasan, MD and CEO of Federal Bank, were speaking on the topic ‘Banks- from the brink.’

Mr. Manoharan said steps like Insolvency and Bankruptcy Code would help in the recovery of bad loans. Also, credit growth was back on track. He said sector-specific reforms were needed to solve the NPA crisis. Mr. Srinivasan said that the phase of recognition of bad loans was over and now, the focus was on recovery.

‘Situation to improve’

Mr. Srinivasan expected the situation to improve in the next three quarters. Mr. Manoharan also said that banks were well prepared and had strategies in place to meet the Basel 3 norms which would kick in from April 2019. He also said Finance Minister Piyush Goyal was keen on the concept of bad bank to which the bad debts would be transferred.

“If it (bad bank) takes shape it would also help the public sector banks to start afresh. Countries like U.S. took eight years to see success from bad bank,” Mr. Manoharan said.

He also said the concept of consolidation with 5-6 anchor banks and merging weaker banks has been put on the back-burner, mainly because of cultural challenges in integration.

Mr. Manoharan said one of the suggestions made to Finance Ministry is classifying banks into three categories.

One is universal banks which does all kind of banking including the corporate lending. Second is national retail banks which would focus on only retail lending. The third is regional retail banks, which would focus on regions.

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