Finance minister Pranab Mukherjee today expressed concern over the deteriorating asset quality of the banking sector,during the inauguration speech of 4001st branch of Bank of India.
Our banks have to tread cautiously on the risks confronting the banking sector especially risks arising out of asset quality,market volatility and global downturn, Mukherjee said.
One of our major concerns is the deteriorating asset quality in the banking sector as a whole where non-performing assets (NPAs) have grown at an uncomfortable rate in the past couple of years,he added.
The net Non-Performing Assets of the Bank of India has increased from Rs 1,945 crore (0.91 per cent) in March 2011 to Rs 3,656 crore (1.47 per cent) in March 2012. The return on assets (annualised) reduced from 0.82 per cent to 0.72 per cent during the same period.
The Reserve Bank of India has recently advised selected banks to take necessary steps for appropriate NPA management.
Bank of India needs to tighten its belt not only to arrest NPA but also to reverse the trend of asset quality deterioration through better professional supervision, advised Mukherjee.