New Delhi, July 21: State-owned banks have pruned further the burden of idle assets last fiscal.

Net non-performing assets of public sector banks “have declined to 1.4 per cent at the end of 2005-06 from 2.2 per cent in the previous year, signifying better credit appraisal and recovery by these banks,” finance minister P. Chidambaram said today.

“This means the banking system is stronger, credit appraisal and recoveries are better,” he added.

“Last year, I had said next year net non-performing assets would go below 2 per cent. It has actually gone down to 1.4 per cent,” he added.

The gross NPA of PSU banks went down to 3.9 per cent as on March 31, 2006 from 5.7 per cent a year ago and 8.1 per cent at the end of 2003-04.

The net NPA as a whole declined to 1.3 per cent at the end of 2005-06. The gross NPA too went down to 3.5 per cent, the minister said.

Chidambaram admitted that last fiscal was difficult as rising interest rates had affected the treasury management of banks and their net profits were hit.

Only five of the 27 PSU banks have achieved the net profit levels projected in the statements of intent they signed with the finance ministry for 2005-06, he said.

Others were “slightly lower” than the projections made by them.