Deposing before the Estimates Committee of Parliament, outgoing Chief Economic Adviser Arvind Subramanian Wednesday expressed scepticism over the handling of the issue of mounting non performing assets (NPAs) of banks.
Subramanian was not sure that the NPA issue would be resolved within a year or two, as bankers claimed. He felt a lot more needs to be done, sources said.
The 30-member committee, headed by former Union minister Murli Manohar Joshi, is examining the issue of ‘Performance of Public Sector Banks-Mechanism for Recovery of Bad Debts and Debt Recovery Tribunals(DRTs)’. The sector is struggling with rising NPAs, which touched Rs 8.99 lakh crore or 10.11 per cent of the total advances at December-end. Of the gross NPAs, the PSU banks accounted for Rs 7.77 lakh crore.
Subramaian, according to the sources, praised former RBI governor Raghuram Rajan for flagging the problem and his efforts to fix it. He indicated that decisions of public sector banks to sanction big loans might have been influenced. But, he did not throw any light on who might have influenced these decisions. He also also said that there was an environment of fear among bankers and consequently, they are reluctant to lend money now. Senior officials of the Bank of Baroda, Canara Bank and Bank of Maharashtra briefed the committee earlier.
The committee heard finance secretary Hasmukh Adhia and senior finance ministry officials Tuesday. They dwelt on the overall state of the economy and the banking sector. The sources said several members asked for more details of deliberations at board meetings of PSU banks with regard to sanction of big loans.