United Bank Crisis An Exception: P Chidambaram

Encountered with bombardment of questions over the United Bank crisis, the finance minister P Chidambaram  said that the finance ministry has reviewed the situation of all the banks and it can be said that the United Bank matter is one off a case and no other bank is going in that direction. Though he said, “The biggest challenge for banks is certainly the rising NPA. Asset quality and NPAs are high in large corporate sector as-well-as SSI and MSE sector whereas it has come down in real estate sector.” For the reasons of increasing in NPA levels he added, “More NPAs are now system generated and can’t be hidden in the system, so the NPA figures that are now reported are much more accurate than figures reported a few years ago.” 

On the matter of recovery, Chidambaram said that banks have been instructed to focus on the recovery and improvement has been noticed in the space. During the first nine months of this fiscal, banks have made actual recovery of Rs 18933 crore while up gradation of Rs 21988 crore of assets have been made. When DSIJ inquired about the current level of NPA in PSUs bank, the FM said that the nine months period figure usually gives a very misleading picture. Currently the figure stands at 3.84% as on March 31, 2013, however, the correct figure would only come after March 31, 2014. “But I can only say it will be “little higher than that”, added the FM.

In the matter of United Bank particularly, Chidambaram said, “Bank has recovered Rs 400 crore in cash and upgraded Rs 800 crore worth of loans. As a result United Bank’s NPAs has reduced by Rs 1200crore. We will discuss the matter separately with the RBI governor on March 7”.  Also, over the risk of this crisis moving over to other banks, Chidambaram replied, “We have NPAs of every bank and I don’t think any other bank has any such problem.”

In the matter of new banking license he said that election code of conduct has nothing to do with issuance of banking license. “The RBI has to take a decision over it and I think the RBI wants to issue a few licenses and the government is not interfering with the decision,” he said.