Finance minister P Chidambaram on Monday expressed concern over rising bad loans of banks and directed them to take stern steps against wilful defaulters.
“We can’t show laxity to wilful defaulters. It can’t be where loans will become non-performing, where borrowers prosper and lenders suffer,” he stressed, adding that banks must pay attention to the portfolio of non-performing assets (NPAs), identify the wilful defaulters and take measures against them.
He, however, cautioned that banks should try to help those who are caught in business downturn to recover so that they can pay the loans in course of time. “One must be sympathetic, one must be stern,” said Chidambaram at the 78th foundation day of Indian Overseas Bank here.
NPAs or bad loans of public sector banks jumped by 28.5 per cent to Rs 2.36 lakh crore by September 2013 from Rs 1.83 lakh crore in March 2013. Total NPAs had gone up to Rs 1.37 lakh crore in March 2012 from Rs 94,121 crore in March 2011.
In fact, the issue was also recently taken up by the Parliamentary Standing Committee on Finance, while the Reserve Bank of India, too, had highlighted the rising stress from bad loans in the banking sector and warned that failure of even one corporate group could wipe out 60 per cent of the banking system’s capital.
Meanwhile, pointing out that huge amount of capital is required in the near future, Chidambaram also urged banks to find internal sources for capital infusion by retaining their profits.
“… I sincerely hope that a significant part of retained earnings can be infused by banks as capital,” he said, pointing out that banks can use the capital for various purposes such as declaring the dividend. Banks infused Rs 35,000 crore from their retained earnings as capital in 2011-12 and Rs 37,936 crore in 2012-13.
Chidambaram said banks are yet to finalise the amount of retained profit they will infuse as additional capital.
All profit can’t be used to pay higher wages: FM to bank employees
New Delhi: With nearly eight lakh employees of public sector banks on a two-day strike for higher wages, finance minister P Chidambaram on Monday said banks can not use their profits only to hike salaries as they have to fulfill other obligations as well. “While claims of officers, staff and employees must be duly acknowledged, and a fair and just wage settlement is arrived at, there are other claimants to banks’ profit,” he said. ENS