Kelkar for reining in NPAs

At the meeting, the heads of banks urged the government to reinforce the recovery mechanism by beefing up the legal process. They pointed out that when there are documents proving that loans have been taken from banks and now the loans are not being returned, no further proof should be necessary in the courts.

Debt-recovery tribunals (DRTs) have only been set up in certain parts of the country. The issue of setting up more DRTs is now under litigation at the Supreme Court. The meeting underlined the need to give DRts more powers of recovery and enhance thenumber of preceding officers at the tribunals.

Banks pointed out that NPA norms in their current form are adequate and no further stringency is required. The chiefs pointed out that while fresh NPAs have come up in certain sectors, many badly performing loans have turned good. However the overall position with respect to NPAs remains more or less the same.

Kelkar reviewed the performance of public sector banks in relation to areas such as priority sector advances, progress of implementation of government sponsored schemes and non-performing assets. Addressing the meeting, the finance secretary pointed out that internationally there is a lot of focus on India’s financial systems. He called upon banks to pay attention to the issue of NPAs and take timely action to reduce them over a period of time.

He said there was an appreciation abroad for India’s success with Resurgent India Bonds. But at the same time there was concern about the health of India’s financial system. He called for adoption of bestpractices available in domestic banks in order to make the banking sector efficient. He also asked banks to bring about a dynamism and depth to capital markets and urged bank chiefs to play a lead role in the forthcoming disinvestment process.

The participants expressed concern about the overexaggeration of NPAs of public sector banks in India and said that this has been done to create panic in the market. They expressed that in the last three years they have recovered Rs 25,000 crore and provisions have been made for another Rs 20,000 crore. They expressed concern over growing NPAs in both the priority and non-priority sectors and said the legal process and the procedures in DRTs have to be streamlined to ensure better recovery.

As regards priority sector lending, it was found that banks have exceeded the target of 40 per cent in the last two fiscals. The State Bank of Travancore with the performance of 57.99 per cent in priority sector advances leads all other banks.

The meeting also reviewed theperformance of the banks with regard to the government’s sponsored credit linked schemes like Prime Ministers’ Rozgar Yojana and Integrated Rural Development Programme. Special secretary banking CM Vasudev conveyed the finance minister’s concern for enhanced loans to rural housing schemes. He said the feedback from National Housing Bank was that the contribution of PSU banks was largely in the form of wholesale lending. He called upon the banking sector to implement the suggestions which have come out of the Kapoor Committee report on the small-scale sector and the RV Gupta Committee report on agriculture.