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LATEST NEWS UPDATES | Financial services secretary Rajiv Takru seeks details of top 50 NPAs from state-run banks

Financial services secretary Rajiv Takru seeks details of top 50 NPAs from state-run banks

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published Published on Mar 4, 2013   modified Modified on Mar 4, 2013
-The Economic Times

 The finance ministry has told all state-run banks to disclose their 50 largest bad loans to help them make a recovery plan and establish a system for zero tolerance against wilful defaulters.

In a recent meeting with heads of state-run banks, new financial services secretary Rajiv Takru told them to furnish details of their top 50 non-performing assets (NPAs), including loan sanctioning officer, terms of loan, the collateral furnished by the borrower and how it covers the risk.

"We are told that recovery steps will be discussed with the chairman of each bank individually after the information is furnished," said the chairman of a state-run bank who attended the meeting. Public sector banks' gross NPA increased 48 per cent in one year, a Care Ratings study said.

For private banks this increase was only 10 per cent during the same period. State-run banks' gross NPA as a percentage of advances increased to 3.92 per cent in December from 3.02 per cent in March 2012. This has triggered alarm.

The finance ministry now wants banks to step up their recovery process and ensure that the restructured accounts are back on track, given the stringent norms for capital adequacy set to be implemented under Basel III from next fiscal.

The banks have also been directed to report to the ministry the monitoring mechanism being followed to recover defaults and the support that needs to be provided where borrowers have defaulted due to circumstances beyond their control. "These steps are a continuation of the government's effort to help state-run banks manage their bad loans," a finance ministry official said.

"In the first phase the focus will be on wilful defaulters," the person added. The Reserve Bank of India in its draft guidelines has stated that standard restructured assets will be treated as non-performing assets from April 1, 2015, which could mean a significant increase in NPAs.

The Care Ratings report said subdued economic activity and consistent high interest rates have impacted the debt repayment capacity of corporates, leading to asset quality deterioration and rise in the quantum of restructured assets across the banking sector.

Devendra Jain, chairman of Atishya Group that runs a dedicated portal, NPAsource.com, for resolution of stressed assets of banks and other financial institutions, says NPA levels in Indian banking system may come under control next financial year if interest rates begin to go down.

The Economic Times, 4 March, 2013, http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/financial-services-secretary-rajiv-takru-seeks-details-of-top-50-npas-from-state-ru


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