Bankers and corporates were on Saturday at the receiving end of finance minister P Chidambarams criticism for the rising bad loans.
Blaming banks for the rise in non-performing assets (NPAs),Chidambaram said,NPAs are high because our recovery mechanism has been soft. Bankers have been tardy and to some extent soft on recovery. We have failing companies and prosperous promoters. We have to recover these loans.
He said bankers have been told in no uncertain terms that both the government and the regulator are together on cracking on recovery. Several banks,including State Bank of India,have set up verticals for loan recovery.
Refusing to take the blame on high NPAs,he said,Why do you leave blame at the door of the government? The responsibility and therefore the blame should stop with the board of directors.
If the NPAs and restructured loans are combined,the distressed loan ratio is close to 10 per cent,or around Rs 5,50,000 crore,as per the figures from the Reserve Bank of India.
Addressing the 20th Anniversary of the National Stock Exchange,Chidambaram said,Banks and corporates have entered into a very cosy relationship. Its very convenient for a corporate to go to a bank for working capital. Its unheard of in any other developed economy. Its very convenient for a bank manager to lend to a highly rated corporate even working capital.
The corporate bond market has not developed because corporates think banks are ready to give the money and banks behave (as if) they are ready to give the money. Its only when a bank says no to a corporate,it is forced to go to the bond market, he said on the poor activity in the bond market.
Listing his concerns on the financial market front,he said,One important concern is the loss of the onshore market in the rupee and Nifty. The volume of trade of the rupee in the NDF (non-deliverable forward) market is multiple times of volume in the official domestic exchanges. Theres an urgent need to resolve the issues inhibiting the growth of the currency derivatives market.
Without mentioning the NSEL payment fiasco,he said,Some recent incidents have alerted us and we must never never take such chances again. We must demand the highest standards of probity from the owners and managers of financial markets infrastructure institutions.
On increasing retail participation,Chidambaram said,Going by the data of two depositories NSDL and CDL,the investor accounts held by them stand at 21.6 million. Its less than 2 per cent of the countrys population. It will be a challenge to drive investors away from the shine of gold and property and to channelise the investments into productive sectors of the economy.