PC Is Mending The House

Finance Minister P Chidambaram today reiterated his earlier call of curtailing NPAs of banks, especially PSU Banks and instructed CMDs of banks to set up separate verticals on the lines of the one put in place by the SBI to speed up the process of recovery from written off accounts. Addressing reporters after a review meeting with the chiefs of PSU banks, Chidambaram said, the government would stick to its earlier plan of infusing an additional capital of Rs14000 crore into these banks to satisfy the tier I capital adequacy norm. Though a rough idea, as to the amount that will be infused into each of the banks has been drafted, each bank chief will be separately consulted for any additional funds needed by them.

According to Chidambaram though there are various ways of infusing additional funds into these banks like a Rights Issue or a Qualified Institutional Placement, it would be left to the banks to decide what was more appropriate for them. This is particularly important in the current scenario where the share prices are not really in sync with the book value of the shares.

According to the FM NPAs is a big concern for banks as well as for the economy as a whole. However, NPAs are a function of the state of the economy, and, as the economy picks up, they tend to come down automatically. Gross NPAs as of June 2013 stood at 3.89 per cent, but if one compares that with where they stood in the year 2000 (@14%) they still look good. “Despite this, the government is very concerned with the growing NPAs and banks have been instructed to keep a strict vigil on willful defaulters, particularly the top 30 non-performing accounts” said Chidambaram.  For this, each Bank has been instructed to create a separate cell under a GM level officer for the recovery of bad loans. Big borrowers, having a loan of more than Rs One crore, are actually defaulting as against the smaller ones and so, action in that direction is necessary.

Touching upon the steps taken by the government and the RBI to give an impetus to the economy, he said that since April 2013, 173 new infrastructure project proposals that were received (of Rs 250 crore and above each) aggregating to Rs 3.24 lakh crore had been cleared. “In addition to this, till March 31, 2013 we had received 176 proposals worth Rs 4.3 lakh crore which have also been cleared. All in all, the situation is not that bad as it is made out to be, and, I have advised Banks to tie up for the finances of these projects.” He summed up by taking stock of the various encouraging steps taken by the RBI like the swap window introduced to attract FCNRB deposits and permission given to raise an amount equal to 100 per cent of the Tier 1 capital scheme, wherein Banks have received around USD 9.6 billion in two months which is very encouraging.